Spirax-Sarco hikes interim dividend; warns on weaker H2 sales

Spirax-Sarco lifted its dividend despite reporting a fall in half-year revenue and profits and warned of lower sales in the second half.

The FTSE 100 engineering firm said its adjusted operating profit was 8% weaker for the six months ended 30 June at £119m, or 7% weaker on an organic basis, as the adjusted operating profit margin narrowed by 100 basis points to 20.9%.

Revenue fell 4% to £569.7m. Cash conversion for the period stood at 86%, up from 67% in the first half of last year. The board declared a 5% increase in the interim dividend, to 33.5p.

Spirax-Sarco said it saw “good” organic sales and profit growth in Watson-Marlow in the period, although sales and profit were down organically in Steam Specialties and Electric Thermal Solutions.

Its recent acquisition, Thermocoax, was said to be performing “strongly”.

Net debt stood at £326m, narrowing from £391.5m, making for a net debt-to-EBITDA ratio of 1.1x.

“In the first half of 2020 we delivered a resilient trading performance, which although weaker than 2019 was stronger than originally feared,” said group chief executive Nicholas Anderson.

Anderson said sales performance for the group in the second quarter was in line with its expectations at the time of its annual general meeting in May, with adjusted operating profit ahead due to stronger than anticipated cost containment and efficiency improvement initiatives.

“As hopes of a V-shaped recovery recede, we now anticipate a lower rate of economic activity in the fourth quarter. As a result, we believe that organic revenue growth in the second half of the year will be lower than we anticipated in May.

“However, due to the operating profit being stronger than forecasted in the first half, our expectations for the full year adjusted operating profit remain unchanged.”

At 0920 BST, shares in Spirax-Sarco Engineering were down 1.59% at 10,510p.