TIDMSPX
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Spirax-Sarco Engineering PLC
18 November 2020
News Release
Wednesday 18(th) November 2020
TRADING UPDATE
Resilient trading in line with expectations; full year
expectations 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 2020.
Economic environment
As anticipated, the global macro-economic environment improved
during the third quarter of the year. Compared with the same period
of 2019, global Industrial Production (IP)(1) was down 4% in the
third quarter, a strong improvement on the 12% contraction in the
second quarter. Following robust sequential month-on-month IP
growth in June and July, the rate of growth slowed markedly in
August and September as industrial activity began to approach
pre-pandemic levels.
Trading
Despite the challenging economic environment, trading has
continued to hold up well. All production facilities remain open
and operating without capacity constraints. Our sales engineers
remain in close contact with our customers globally, with physical
access to customers' facilities improving in those regions that are
not subject to new lockdown measures.
Consistent with expectations shared at the Half Year results
announcement in August, the organic sales decline in the four
months to the end of October was less pronounced than in the first
half of the year, supported by the recovery of global IP. Overall,
the rate at which reported sales declined was marginally less than
in the first half of the year, when reported sales benefited from
the inclusion of Thermocoax which joined the Group in May 2019.
In the Steam Specialties business, organic sales in the four
months to October declined less than in the first half of the year
as the contraction in IP lessened across all regions and China
returned to IP growth.
In the Electric Thermal Solutions business, organic sales in the
four months to October also declined at a lower rate than in the
first half of the year, as a similar organic sales decline in
Chromalox was mitigated by strong organic sales growth in
Thermocoax.
In the Watson-Marlow Fluid Technology Group, organic sales
growth was higher in the four months to October compared with the
first half of the year, as sales to the Biopharmaceutical sector
remained strong and sales to the other industrial sectors recovered
in line with global IP. Watson--Marlow's exposure to the
Biopharmaceutical and Medical Device markets makes it more
resilient to the impact of COVID--19, with many customers working
on vaccine development and preparing for mass vaccine
production.
The Group operating profit margin was higher in the four months
to the end of October than in the first half of the year, supported
by increased sales and continued cost containment actions. In the
ten months to the end of October, the Group operating profit margin
remained slightly below the same period in the prior year.
Currency effects continued to have an adverse impact on sales
and operating profit, compared to the same period of 2019, as
sterling maintained its strength against our basket of trade
currencies. If spot rates at 31(st) October 2020 prevail for the
remainder of the year, the headwind effect on full year sales and
profit would be 2% and 4% respectively.
Financial position
Our business remains highly cash generative and we maintain a
strong balance sheet. Excluding leases, our net borrowings at
31(st) October 2020 were GBP254 million, down from GBP326 million
on 30(th) June 2020. The interim dividend of 33.5p per share was
paid on 6(th) November at a cash cost of GBP25 million.
People
We continue to recognise and appreciate the individual and
collective efforts of our 7,800 employees across nearly 70
countries that have allowed us to meet the needs of our customers.
We have maintained a strong focus on the health and wellbeing of
our employees and, thankfully, the rate of infection amongst our
employees remains very low.
As previously announced, Neil Daws, Managing Director Steam
Specialties and Executive Director will retire from the Steam
Specialties business and the Board on 31(st) December 2020 after
more than 42 years of service. We would again like to thank Neil
for his huge contribution to the Group.
We are pleased to announce that Neil's successor, Maurizio
Preziosa, will take over as Managing Director Steam Specialties
from 1(st) January 2021 and become a member of the Group Executive
Committee. Maurizio will be based at the Group Headquarters in
Cheltenham, UK. Maurizio joined the Group in November 2011 as
General Manager for Spirax-Sarco Italy, progressing to the role of
Regional General Manager for Southern Europe in 2014, before
becoming Divisional Director for Gestra in May 2017 where he led
the successful integration and growth of the Gestra
acquisition.
Also as previously announced, Angela Archon and Olivia Qiu will
join the Board as Independent Non-Executive Directors effective
1(st) December 2020.
Outlook
After reaching a low point in the second quarter when global IP
contracted 12%, macro-economic conditions improved in the third
quarter with a global IP contraction of 4%. IP is now forecast to
contract by an overall 5.5% in 2020. However, the sequential
month-on-month rate of IP growth slowed markedly in August and
September, infection rates remain high in the Americas and
increasing levels in Europe are resulting in further lockdowns.
Although the impact on IP growth in the fourth quarter resulting
from the COVID-19 resurgence remains uncertain, these factors could
further slow the rate of IP recovery in the final quarter of 2020,
as we anticipated at the Half Year results announcement in
August.
Sales and adjusted operating profit in the four months to the
end of October were in line with our expectations at the time of
our Half Year results. Therefore, absent a significant global IP
deterioration in the remaining months of 2020, our overall
expectations for the full year remain unchanged.
Spirax-Sarco Engineering plc expects to publish its preliminary
2020 results on 10(th) March 2021.
(1) Source for industrial production data: Oxford Economics,
6(th) November 2020.
Enquiries:
Nicholas Anderson, Group Chief Executive
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 30(th) June 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
7,800 people, of whom close to 1,800 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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