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Spirax-Sarco Engineering PLC
12 May 2021
News Release
Wednesday 12(th) May 2021
AGM TRADING UPDATE
Strong start to the year, improved outlook for 2021
Thermal energy management and niche pumping specialist,
Spirax--Sarco Engineering plc, issues the following trading update
in respect of the four months ended 30(th) April 2021.
Economic environment
As anticipated, the global macro-economic environment continued
to improve during the first quarter of the year. Compared with the
same period of 2020, global Industrial Production (IP)* expanded
7.4%, up from 6.1% forecasted at the time of our preliminary
results in March.
Trading
Organic sales growth in the four months to the end of April was
ahead of global IP. Watson-Marlow continued to experience
exceptional COVID-19 vaccine related demand from its customers in
the Pharmaceutical & Biotechnology sector. In the first four
months of the year, organic growth of Watson-Marlow's sales to the
Pharmaceutical & Biotechnology sector outperformed our
anticipated growth of 35% for 2021. Across the Group's other
revenue streams in Steam Specialties, Electric Thermal Solutions
and Watson-Marlow's Process Industries sectors, organic sales
growth was ahead of IP over the same period.
COVID-19 continues to disrupt global supply chains, leading to
escalation in raw material and freight costs, although both remain
within our expectations. During the first four months of the year,
we accelerated our revenue investments to support future organic
growth and trading margin expansion, although the increase in
expenditure lagged sales growth over the period. The Group
operating profit margin in the first four months of the year was
higher than previously anticipated for the full year 2021,
supported by the strong sales growth and higher operational
gearing.
Currency effects continued to have an adverse impact on sales
and operating profit, compared to the same period of 2020, as
sterling strengthened against our basket of trade currencies. We
continue to anticipate a headwind effect on full year sales and
profit of less than 4% and more than 4%, respectively.
Financial position
Our business remains highly cash generative and we maintain a
strong balance sheet. Excluding leases, our net borrowings at
30(th) April 2021 were GBP173 million, down from GBP229 million on
31(st) December 2020. The final dividend of 84.5p per share will be
paid on 21(st) May** with a cash impact of GBP62 million.
Outlook
The world is recovering faster than previously anticipated from
the adverse economic effects of the COVID-19 pandemic, supported by
sizeable fiscal stimulus packages. Macroeconomic forecasts have
improved consistently since the beginning of the year, with global
IP now forecasted to expand 8.5% in 2021, which compares to a
forecast of over 7% growth at the time of our preliminary results
in March. However, given the difficulties faced by many emerging
economies in implementing their vaccination plans and the continued
uncertainty surrounding the ability to resume normal international
trading activities, it is plausible that these forecasts could be
subject to revisions over the coming months.
We now anticipate Watson-Marlow's organic growth in sales to the
Pharmaceutical & Biotechnology sector will be over 55% in 2021
due to continuing strong COVID-19 related demand. This sector
accounted for over 55% of Watson-Marlow's sales in 2020. We
anticipate the Group's other revenue streams will deliver organic
sales growth in 2021 above the increased forecast for global IP
growth. Additionally, Electric Thermal Solutions ended 2020 with a
higher than-normal order book, which should add at least a further
GBP8 million to sales in the year.
We are accelerating capacity expansion initiatives in
Watson-Marlow and we continue to step-up our revenue investments,
with these increased expenditures weighted towards the second half
of the year. Taken together with higher sales growth and the impact
of operational gearing, we anticipate the full year drop-through
from the organic increase in sales to operating profit to be close
to 35%, which is above our previous guidance.
Spirax-Sarco Engineering plc expects to publish its 2021
half-year results on 11(th) August 2021.
Enquiries:
Nimesh Patel, Chief Financial Officer
Shaun Laubscher, Head of Investor Relations
Tel: 01242 535234
*Source for industrial production data: Oxford Economics, 26(th)
April 2021.
**Subject to shareholder approval
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
7,900 people, of whom close to 1,900 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
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