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Spirax-Sarco Engineering PLC
10 May 2023
News Release
10(th) May 2023
AGM trading update
Trading in line with expectations; full year guidance
maintained
Economic environment
Following global Industrial Production growth(1) (IP) of 2.8% in
2022, IP was 0.6% in the first quarter of 2023 against a backdrop
of continuing uncertainty over the global macroeconomic outlook. IP
is expected to strengthen modestly by the end of the year, with
full year 2023 IP now forecasted to be 1.3%.
Trading
Organic sales growth in the four months to the end of April was
in line with our expectations, driven by growth significantly above
IP in Steam Specialties and Electric Thermal Solutions (ETS).
Watson-Marlow sales were lower compared to the same period of 2022,
as anticipated, reflecting the ongoing normalisation of COVID-19
related demand from Biotechnology & Pharmaceutical
customers.
Order books in Steam Specialties and ETS remain at historically
high levels driven by strong demand. Watson-Marlow's monthly order
intake has remained at a level similar to the fourth quarter of
2022. As the underlying demand for cell and gene therapy
medications remains strong, we continue to anticipate an increase
in order intake in the second half of the year once Biotechnology
& Pharmaceutical customers have worked through their excess
stocks. However, defining the precise timing and initial pace of
this return to growth remains difficult.
Integration of the acquisitions of Vulcanic and Durex Industries
is progressing well, supported by revenue investments to raise the
operations to our standards and deliver future growth.
As expected, the Group adjusted operating profit margin in the
first four months of the year was lower than the same period in
2022. Consistent with the strong sales performance in Steam
Specialties and ETS, both Businesses delivered increased margins,
while Watson-Marlow's margin was lower due to the operational
gearing effect of reduced sales.
We still anticipate Watson-Marlow's adjusted operating profit
margin and therefore the Group's margin, will recover in the second
half of the year, driven by expected higher demand and the full
benefit from actions taken in the first quarter to right-size
Watson-Marlow capacity and overhead support costs.
Currency movements had a small positive effect on sales and
operating profit, compared to the same period of 2022. If current
exchange rates were to prevail for the remainder of the year, we
anticipate a modest adverse effect on full year sales and profit,
compared with the full year 2022.
Financial Position
Excluding leases, net debt at 30th April 2023 was GBP710
million, up from GBP690 million at 31st December 2022. The final
dividend of 109.5 pence per share, a 12% increase over prior year,
will be paid on 19th May 2023, subject to shareholder approval,
with a cash impact of GBP81 million.
We anticipate cash conversion will improve in 2023 to above 70%,
including capital expenditure at approximately 7% of sales.
Outlook
Although the global macroeconomic outlook remains uncertain,
forecast IP for 2023 of 1.3% remains within the range of our
planning assumptions. As our trading in the first four months of
the year is also in line with our expectations, we are maintaining
our full year guidance for the Group.
We continue to anticipate double-digit sales growth for the
Group in 2023, representing mid-single-digit sales growth over 2022
pro-forma sales(2) . We also continue to anticipate both sales and
adjusted operating profit to be more weighted to the second half of
the year than in previous years, with a small progression in the
Group's full year adjusted operating profit margin.
(1) Source for Industrial Production data: Oxford Economics,
25th April 2023
(2) Group Sales in 2022 pro-forma for the twelve-month
contribution from the acquisitions of Vulcanic and Durex
Industries
Spirax-Sarco Engineering plc expects to publish its 2023 Half
Year results on 10th August 2023.
Enquiries:
For further information, please contact:
Nimesh Patel, Chief Financial Officer
Mal Patel, Head of Investor Relations
Tel: +44 7392 263166
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 process heating products,
engineered packages, site services and systems expertise for a
diverse range of industrial and institutional customers. Both
businesses help their customers improve process efficiencies, meet
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 40
strategically located manufacturing plants around the world and
employs more than 10,400 people, including more than 2,100 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 Indexes.
Further information can be found at
www.spiraxsarcoengineering.com
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