Spirax-Sarco secures steam specialist

Engineering group Spirax-Sarco is buying energy consulting group Cotopaxi for £13.3m.

Skelmersdale-based Cotopaxi has software systems and provides consultancy advice to help industrial businesses drive down costs through monitoring energy-intensive processes, such as steam use. The company reported revenue of £2.2m in 2020, a fall from £4.8m prior to the pandemic. It employs 38 engineers and software specialists.

The business will be integrated into Spirax-Sarco’s Steam Specialities arm.

Spirax-Sarco has a strong track record of delivering returns on total capital of more than 20 per cent to investors and its shares are highly rated. Despite a 19 per cent slump in value since the start of this year, the company’s shares still trade at 38-times forward earnings – well above its peers and its own five-year average. The potential for gains, at least in the short term, look limited. Hold.

Supply chain pressures cause profit warnings to rise

Profit warnings increased by almost a fifth in the final quarter of last year, with almost half citing supply chain disruption as a significant factor.

There were 70 profit warnings made by UK-listed companies in the final three months of the year, up from 51 in the third quarter.

Supply chain pressures were mentioned by 44 per cent of firms issuing warnings (compared to just 2 per cent between 2009-19), with a further 27 per cent blaming rising costs, EY-Parthenon’s latest Profit Warnings report said.

The number of firms issuing profit warnings throughout last year dropped by 65 per cent, though, to 203. That is the second-lowest number since EY began tracking warnings in 1999.

More profit warnings are expected this year, as inflationary pressures cause a hit to disposable incomes and company margins.

“We have already recorded profit warnings relating to rising energy prices. Labour shortages and wage increases are also beginning to feature more in company concerns, especially in logistics, hospitality and healthcare,” said Alan Hudson, a partner at EY-Parthenon.

He also expects more restructuring activity to take place this year as the last government support measures, such as a rent moratorium for retailers, fall away.