Mid-cap engineers outperform market

Among the top 10 risers on the London Stock Exchange on Monday are three FTSE 250 engineering groups that had been hit by the fallout of the commodities downturn over the past year, but whose prospects could be brightening.

Shares in Rotork are up nearly 4 per cent to 245.1p after it offered a cautiously positive outlook despite revealing a drop in earnings in 2016. The company supplies actuators – safety devices that open and close valves – to the oil and gas industry, as well as for water systems and power stations.

Although sterling’s devaluation helped boost Rotork’s revenue by 8 per cent to £590.1m, after stripping out acquisitions and restating at the prior year’s exchange rate there was an 8 per cent contraction.

However, Peter France, chief executive, told the FT that he expected a reversal this year.

“On an organic level, we expect [revenue] to grow, but in a modest way and a little bit of [additional revenue from] acquisition and currency on top of that.”

Mr France said there was a “stabilisation” in the oil and gas industry, which provides just over half of group sales, particularly in the upstream segment of US onshore, meaning exploration and production. Rotork issued a rare profit warning in 2015 as customers in the energy sector cancelled and delayed projects in response to the oil price crash.

The company’s pre-tax profit shrank 10.6 per cent to £91.1m in 2016, and by more than one-fifth on an organic and constant currency basis. Despite that, investors in Rotork are set to receive a 1 per cent increase in the full-year dividend.

Also in the top 10 risers was IMI, the UK-listed valve manufacturer, which last week unveiled annual earnings slightly ahead of analysts’ forecasts, despite a fall in sales and profits on an organic basis. The stock is up 3.9 per cent to £12.64.

And completing the trio was Vesuvius, which makes heat-resistant linings for vessels that hold molten metal and supplies the iron and steel industries. Global output of the grey metal in January was up 7 per cent compared to a year earlier, driven by production in China. Shares in Vesuvius, which reports full-year results on Thursday, are up 3.3 per cent on Monday to 459.5p.