2015 Results for year ended 31 st December 2015 Bill Whiteley – Chairman Nick Anderson – Chief Executive David Meredith – Finance Director
Agenda 2015 Highlights 2015 Financial Review Operations and Outlook Appendices 2015 Results Year ended 31st December 2015 2
2015 Highlights Constant 2015 2014 Change currency Revenue £667.2m £678.3m -2% +2% Operating profit* £152.4m £153.0m 0% +4% Margin* 22.8% 22.5% +30 bps +40 bps Pre-tax profit* £151.1m £151.1m 0% +4% Tax rate 29.8% 29.9% EPS* 142.6p 140.4p +2% +6% DPS 69.0p 64.5p +7% +7% Special dividend - 120.0p - - * See Appendix IV for definition of profit measures. • Organic sales increased 2% • Record operating margin of 22.8% • Another strong performance in Watson-Marlow • Robust cash generation, 95% cash conversion • Dividend increased by 7% 2015 Results Year ended 31st December 2015 3
Agenda David Meredith 2015 Financial Review 2015 Results Year ended 31st December 2015 4
Segment revenue changes At constant currency +1% -4% +1% +13% -4% £m 18.0 2015 Sales (£m) EMEA 219.4 13.0 Asia Pac 171.8 Americas 123.4 8.0 WM 152.6 Total 667.2 3.0 Organic sales -2.0 EMEA Asia Pac Americas Watson-Marlow FX versus 2014 -7.0 Steam Spec 0% -£24m WM +9% -12.0 Group +2% Rates of change at constant currency. % Change v 2014 H1 H2 Year Organic sales +3% +1% +2% Acqns/Disposals +0% +1% +1% FX -3% -5% -4% TOTAL +0% -3% -2% 2015 Results Year ended 31st December 2015 5
Segment operating profit changes At constant currency +11% -7% 0% +10% -4% £m 5.0 2015 Profit (£m) EMEA 42.7 3.0 Asia Pac 44.7 Americas 27.1 1.0 WM 48.0 Corp Exp (10.0) EMEA Asia Pac Americas Watson-Marlow FX -1.0 Total 152.4 -3.0 2015 Margins -5.0 EMEA 19.5% Asia Pac 26.0% Americas 22.0% -7.0 Based on adjusted profit at constant WM 31.4% % Change v 2014 H1 H2 Year currency – see Appendix IV. Operating profit (constant ccy) 0% +7% +4% Op. margin 2015 20.6% 24.9% 22.8% Op. margin 2014 21.0% 23.9% 22.5% 2015 Results Year ended 31st December 2015 6
Profit bridge 2014 to 2015 £m 155 • Further FX translation headwind of 153.0 152.4 150 £6.3m • Disposal of M&M 145 -£0.4m. Acquisitions (6.3) (0.4) (3.6) 4.6 3.2 1.1 0.8 0.0 +£1.1m. Similar 140 net full year effect in 2016 • Reduced profit in 135 Asia Pacific • Good gains in 130 EMEA and Watson-Marlow 125 • Lower corporate 2014 FX M&M Asia Pacific Americas EMEA Watson- Acq'ns Corporate 2015 costs Marlow * See Appendix IV for definition of profit measures. 2015 Results Year ended 31st December 2015 7
Record operating margin of 22.8% 25.0% 25.0% 20.0% 20.0% 15.0% 15.0% 24.9% 23.9% 23.3% 22.4% 21.3% 20.6% 21.0% 21.0% 20.6% 19.9% 19.5% 19.3% 10.0% 10.0% 18.6% 17.1% 17.1% 17.1% 17.0% 15.8% 15.3% 15.0% 5.0% 5.0% 0.0% 0.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 H1 H2 Year 2015 Results Year ended 31st December 2015 8
Robust cash flow Pounds (£) million 2015 2014 • Strong cash Adjusted operating profit* 152.4 153.0 generation – Depreciation and share schemes 25.5 25.1 95% cash Working capital (1.6) (14.5) conversion Capital expenditure (including capitalised R&D) (30.8) (31.4) • Small working Adjusted cash from operations 145.5 132.2 capital outflow Interest 0.8 (0.1) • Increased tax Tax paid (43.3) (41.9) paid Free cash flow 103.0 90.2 • Dividends paid Dividends paid (net) (140.5) (45.1) £140m, including Provisions/EMCO costs paid/special pension payments (1.4) (5.6) £91m special Shares issues/purchased (net) 4.7 2.2 dividend Acquisitions and disposals (10.2) (10.0) • Closing net cash Cash flow for the period (44.4) 31.7 of £4.8m Net cash balance 4.8 52.5 ROCE 44.1% 44.3% * See Appendix IV for definition of profit measures. 2015 Results Year ended 31st December 2015 9
Dividend growth 190.0 120p • …. • Core dividend up 170.0 100p 7% to 69.0p 150.0 • 9.9% pa increase 130.0 over last five and Pence per share 11.2% over last 110.0 ten years 90.0 • 48 year dividend 25p +7% record, 10.9% pa 70.0 +9% +11% increase +8% +14% 50.0 +19% +8% 48.2p +11% +13% +11% 30.0 10.0 20.8p -10.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 DPS Interim DPS Final Special dividend 2015 Results Year ended 31st December 2015 10
Underlying margin factors Effects on underlying margins* 2015 2016 Currency movements Operating leverage Sales pricing (vs. inflation) Material prices Manufacturing strategies Business and product mix Business development investment * The arrows as shown are qualitative and indicate direction only. 2015 Results Year ended 31st December 2015 11
Agenda Nick Anderson Operations and Outlook 2015 Results Year ended 31st December 2015 12
Annual IP growth rates by quarter 2012-2016 Projected Actual 5.0% Developed (OECD) Feb 16 Emerging (Non-OECD) Feb 16 Global Feb 16 Developed (OECD) Jun 15 Emerging (Non-OECD) Jun 15 Global Jun 15 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% Source: CHR Economics – June 15 & Feb 16 -2.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2012 2013 2014 2016 2015 Results Year ended 31st December 2015 13
Europe, Middle East & Africa (EMEA) 31 st Dec 31 st Dec Organic Constant Change 2014 2015 currency Exchange Organic Disposal Sales* £236.2m (£19.7m) £219.4m +2% +1% -7% £4.9m (£2.0m) Op profit* £45.9m £42.7m +12% +11% -7% (£7.4m) £4.6m (£0.4m) Margin* 19.4% 19.5% +170 bps +170 bps +10 bps * See Appendix IV for definition of profit measures. Organic measures at constant currency and exclude acquisitions and disposals. • Organic sales up 2%; sales growth in most operations • UK modestly lower and Russia down; positive start in Egypt • Currency headwinds reduced sales 8%; M&M disposal 1% reduction • Operating profit up 11%; currency headwinds reduce by 16% • Headcount reduced in UK manufacturing; £0.6m net benefit in 2015 • Profit margin up 10 bps – cost control, price management, efficiency 33% improvements, flat material costs off-set currency impact • Remain positive despite continued market challenges of Group sales 2015 Results Year ended 31st December 2015 14
Asia Pacific 31 st Dec 31 st Dec Organic Constant Change 2014 2015 currency Exchange Organic Acquisitions Sales* £177.7m £171.8m -4% -4% -3% £2.0m (£7.9m) - Op profit* £46.4m £44.7m -7% -7% -4% £1.9m (£3.6m) - Margin* 26.1% 26.0% -90 bps -90 bps - 10 bps * See Appendix IV for definition of profit measures. Organic measures at constant currency and exclude acquisitions and disposals. • Sales down 4%; China’s economic slowdown impacts whole region • Encouraged by demand stabilisation in H2 2015 • China sales & profit marginally up; large projects down, self-generated projects up • Korea sales & profit down; large projects down, some shipments delayed to 2016 • Sales and profit well ahead in Japan, down in Australasia, mixed South East Asia • Operating profit down 7%; significant H2 improvement versus H1 26% • Direct sales in India since July; pre-trading and start-up losses of nearly £2m • Started new operation in Vietnam (Jan 2016) of Group sales • Positive long-term outlook despite current economic uncertainty 2015 Results Year ended 31st December 2015 15
Americas 31 st Dec 31 st Dec Organic Constant Change 2014 2015 currency Exchange Organic Acquisitions Sales* £126.2m £123.4m +1% +1% -2% (£4.1m) £1.3m - Op profit* £28.0m £27.1m 0% 0% -3% (£0.9m) £0.0m - Margin* 22.2% 22.0% -20 bps -20 bps -20 bps * See Appendix IV for definition of profit measures. Organic measures at constant currency and exclude acquisitions and disposals. • Sales up 1%; North America 2% down, Latin America 5% up • North America – weak distribution markets; closed meter manufacturing plant • Latin America – sales up in all operations, except Brazil; new operations in Colombia and Peru • Good progress implementing strategy; success with direct key accounts in USA • Significant currency fluctuations; overall 3% reduction in sales 18% • Operating profit flat; cost saving actions offset by investments for growth • Remain positive on the region despite slowing industrial production of Group sales 2015 Results Year ended 31st December 2015 16
Watson-Marlow 31 st Dec 31 st Dec Organic Constant Change 2014 2015 currency Exchange Organic Acquisitions Sales* £138.2m £152.6m +9% +13% +10% (£2.7m) £11.6m £5.5m Op profit* £43.5m £48.0m +7% +10% +10% £0.2m) £3.1m £1.2m Margin* 31.5% 31.4% -40 bps -80 bps -10 bps * See Appendix IV for definition of profit measures. Organic measures at constant currency and exclude acquisitions and disposals. • Organic sales up 9%, plus 4% from three 2015 acquisitions • Strong growth in all geographic regions • Biopharm, OEM, Food & Beverage sectors all up strongly • Good first-time contribution from Asepco • Operating profit up 10%; margin edged down by investments for growth and some dilution from acquisitions 23% • New direct sales operations in Japan, Taiwan and Chile • Active product development pipeline supports future growth of Group sales 2015 Results Year ended 31st December 2015 17
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