12th Aug 2020 09:07
(Alliance News) - Spirax-Sarco Engineering PLC on Wednesday was more pessimistic about the pace of recovery in rest of the year but maintained expectations after a good first half.
The FTSE 100-listed thermal energy management company reported a GBP106.3 million pretax profit for a six months ended June 30, down 1.7% from GBP108.1 million the year before.
Revenue fell 3.6% to GBP569.7 million from GP591.2 million with all three of its segments posting lower revenue, including a 9.3% revenue drop from largest segment Steam Specialties to GBP331.7 million.
The company increased its dividend per share by 4.7% to 33.5 pence from 32.0p a year before.
The company, which is headquartered in Cheltenham, noted that 85% of its demand is from customers' operating, rather than capital, budgets, with a high proportion of its revenue coming from sectors less hurt by the pandemic like water treatment of healthcare.
Capital expenditure has been slashed by companies seeking to weather the coronavirus pandemic, hurting suppliers for such projects.
Should exchange rates as at July end continue for the rest of the year, Spirax-Sarco would experience a 2% headwind on the translation of sales for 2020 as a whole and a 4% hit to operating profit.
In May, the company forecast that its full year drop through of total revenue decline to operating profit in 2020 would be contained to approximately 45%.
In the half-year, its adjusted operating profit fell 7.9% to GBP119.0 million from GBP129.2 million.
While organic revenue growth in the second half will likely drop from its May expectations due to slower than expected recovery, a stronger than anticipated first half profit means adjusted operating profit expectations for 2020 as a whole have not changed.
Chief Executive Nicholas Anderson said: "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."
Shares in Spirax-Sarco were down 1.3% at 10,525.00p in London on Wednesday morning.
By Anna Farley; [email protected]
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