TIDMSPX
RNS Number : 6769G
Spirax-Sarco Engineering PLC
17 November 2022
News Release
Thursday 17(th) November 2022
TRADING UPDATE
Robust trading despite economic headwinds; profit guidance
unchanged
Thermal energy and niche pumping specialist, Spirax-Sarco
Engineering plc, issues the following trading update in respect of
the four months ended 31(st) October 2022.
Economic Environment
As expected, the macroeconomic outlook has continued to weaken.
Global industrial production growth(1) (IP) is now forecasted to be
2.9% in 2022, lower than 3.5% forecasted in July, although still
above pre-pandemic levels. For 2023, the IP forecast has also been
revised downwards to 1.0%, from 3.2% in July.
Trading
Underlying demand growth remained strong in the four months to
the end of October despite the weakening IP forecast, with orders
in Steam Specialties, Electric Thermal Solutions ("ETS") and
Watson-Marlow's Process Industries remaining above our expectations
at the Half Year Results in August.
Demand from Watson-Marlow's customers in the Pharmaceutical
& Biotechnology sector started normalising in the second
quarter of 2022, reflecting lower COVID-19 vaccine demand. This
trend continued in the four months to the end of October, with some
customers rescheduling deliveries into 2023.
Following the successful management of global supply chain
challenges, as well as increases to our manufacturing capacity,
Group organic sales grew strongly in the four months to the end of
October.
We remain focused on successfully addressing inflationary
pressures through active price management. Steam Specialties'
adjusted operating profit margins in the period were ahead of our
half-year expectations and offset lower adjusted operating profit
margins in ETS, where highly engineered solutions with longer
delivery lead-times were impacted by higher material inflation.
Watson-Marlow's adjusted operating profit margin in the period was
lower than anticipated due to the rephasing into 2023 of higher
margin sales to Pharmaceutical & Biotechnology customers, which
resulted in a Group adjusted operating profit margin below that of
the first half of 2022.
On 29(th) September, the Group completed the acquisition of
Vulcanic. For the 12 months to 31(st) August and on a comparable
basis, Vulcanic revenues were EUR99.9 million, EBITDA was EUR19.9
million and EBIT was EUR17.8 million. On 28(th) September the Group
also announced the acquisition of Durex , which is expected to
close on 30(th) November. For the 12 months to 31(st) August, Durex
revenues were US$74.5 million, EBITDA was US$25.3 million and EBIT
was US$23.5 million.
On 15(th) September, ETS closed its loss-making Chromalox plant
in Soissons (France), three months earlier than anticipated. The
ongoing order book is being deployed for fulfilment by neighbouring
Vulcanic manufacturing operations.
Currency effects had approximately a 3.5% positive impact on
both sales and operating profit in the four months to October
compared to the same period of 2021, as sterling weakened against
our basket of trade currencies. If current exchange rates were to
prevail for the remainder of the year, we anticipate close to a 4%
positive impact on full year 2022 sales and profit, compared with
the full year 2021.
Financial Position
Following the completion of the Vulcanic acquisition, our net
borrowings (excluding leases) on 31(st) October were GBP391
million, up from GBP203 million on 30(th) June. Following
completion of the Durex acquisition, net debt will increase further
resulting in a Group net debt to EBITDA ratio close to 1.5x, on a
pro-forma basis.
Outlook
Our guidance for the Group's full year 2022 adjusted operating
profit, excluding contributions from the recent acquisitions,
remains unchanged.
For the full year 2022, we anticipate close to 15% organic
growth for Watson-Marlow's sales to the Pharmaceutical &
Biotechnology sector, as well as growth very significantly above IP
for the remainder of the Group's organic revenues. Overall,
including currency effects and excluding contributions from
acquisitions, revenues in the second half of the year are trending
slightly above the typical 52% of full year revenues. Consistent
with the four months to the end of October, we anticipate the
Group's full year adjusted operating profit margin to be below that
of the first half of the year.
The Vulcanic and Durex acquisitions will add to Group revenue
and operating profit in 2022 as of their respective completion
dates.
Looking ahead to 2023, the global IP forecast has been revised
downwards to 1.0%, from 3.2% in July, while global inflation rates
are forecasted to remain high. We remain confident in the Group's
proven resilience in a weakening macro-economic climate,
underpinned by our strong order book carried forward and our
well-established price management practices to offset inflationary
cost pressure. On the basis of current economic forecasts, we
anticipate at least mid-single-digit Group organic sales growth,
together with a small operating margin progression.
Spirax-Sarco Engineering plc expects to publish its 2022 Full
Year results on 9(th) March 2023.
Enquiries:
Nicholas Anderson, Chief Operating Officer
Nimesh Patel, Chief Financial Officer
Tel: +44 (0)1242 248 515
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
9,900 people, including more than 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
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END
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