Spirax-Sarco Rewards Investors With 12% Dividend Increase After Strong 2022 Results

Wide-moat Spirax-Sarco SPX reported a strong set of full-year results, which were largely consistent with our expectations. Organic revenue grew 14%, comfortably ahead of global industrial production, and was further boosted by recent acquisitions. Organic operating profit growth of 7% was at a slower rate than revenue, which was anticipated given the step-up in the group’s investments for future growth opportunities.

Nevertheless, the adjusted operating profit margin of 23.6% (a 160-basis-point decline) remains extremely impressive and epitomizes the quality of the group. We expect these investments combined with a record order book across its steam specialties and electric thermals solutions segments to support Spirax-Sarco’s outperformance against global industrial production. We reiterate our GBX 11,800 fair value estimate and view shares as fairly valued.

Watson-Marlow continues to be the best-performing segment, delivering organic revenue growth of 16%. The segment continues to see strong underlying demand from other pharmaceutical and biopharma customers, which will help mitigate the ongoing decline in demand from customers involved in the production of COVID-19 vaccines. The group anticipates mid-single-digit organic growth, which is consistent with our estimates.

Investors have been rewarded with a 12% increase in the group’s dividend to 152 pence per share.