2017 RESULTS YEAR ENDED 31 ST DECEMBER 2017 Bill Whiteley (Chairman) Nicholas Anderson (Group Chief Executive) Obadah Zaher (Research Team Leader) and Jagoda Cieslik (Year in Industry Student, R&D) reviewing a steam system’s health using a SIMS™ software and energy monitoring solution from Spirax Sarco 0 2017 Results Year ended 31st December 2017 Engineering Opportunities
Agenda 2017 Highlights Bill Whiteley 2017 Financial Review Operations and Outlook Nicholas Anderson 1 2017 Results Year ended 31st December 2017 Engineering Opportunities
2017 Highlights 2017 2016 Organic sales growth of 6% • Reported sales £998.7m £757.4m Adjusted operating margin • of 23.6% Organic sales growth ⁺ +6% +4% Good growth in Steam Operating profit margin* 23.6% 23.8% • Specialties and Watson- EPS* 220.5p 171.5p Marlow DPS 87.5p 76.0p Acquisitions performing in • Cash conversion 86% 101% line with plan; adding 20% to sales, 14% to profit ⁺ Organic measures are at constant currency and exclude acquisitions. Net debt of £373.6 million, • * See Appendix IV for definition of adjusted profit measures. 1.4x EBITDA Full Year dividend • increased by 15% 2 2017 Results Year ended 31st December 2017 Engineering Opportunities
Agenda 2017 Highlights Bill Whiteley 2017 Financial Review Operations and Outlook Nicholas Anderson 3 2017 Results Year ended 31st December 2017 Engineering Opportunities
Financial performance 2017 2016 Reported Organic ⁺ Revenue £998.7m £757.4m +32% +6% • Organic sales up 6%; growth in all Operating profit* £235.5m £180.6m +30% +6% segments of Steam Specialties and Operating profit margin* 23.6% 23.8% -20 bps +0 bps Watson-Marlow Net finance expense (£6.4m) (£2.6m) • Good first time Associates* £0.0m (£0.1m) contribution from Gestra and Pre-tax profit* £229.1m £177.9m +29% Chromalox Tax rate* 29.1% 29.1% +0 bps • Operating profit up 6% organically EPS* 220.5p 171.5p +29% • Tax rate remained DPS 87.5p 76.0p +15% constant ⁺ Organic measures are at constant currency and exclude acquisitions. * See Appendix IV for definition of adjusted profit measures. • EPS +29%; organic growth, acquisitions and exchange 4 2017 Results Year ended 31st December 2017 Engineering Opportunities
Sales bridge Increase in sales £m 154.8 1,000 • Currency (FX) gain H2 2017 of 5% H1 2017 950 998.7 • Total organic ⁺ 900 growth of 6%; Steam Specialties 20.2 850 +5%, Watson- 27.9 Marlow +10% 38.4 800 • Acquisitions add 20% 750 700 757.4 650 600 ⁺ Organic measures are at 550 constant currency and exclude acquisitions 500 2016 FX Steam Watson- Acquisitions 2017 Specialties Marlow org. growth org. growth 5 2017 Results Year ended 31st December 2017 Engineering Opportunities
Profit bridge Increase in adjusted operating profit £m • Adjusted operating (0.2) 240 4.5 profit* +30% 3.6 0.4 3.6 27.0 • Significant exchange 220 benefit adds 9% • Acquisitions add 16.0 14% 200 235.5 • Organic profit growth of 6% 180 160 180.6 140 120 * See Appendix IV for definition of adjusted profit measures 100 2016 FX M&A EMEA AsiaPac Americas WMFTG Central 2017 6 2017 Results Year ended 31st December 2017 Engineering Opportunities
Operating margin of 23.6% 24.7% • Excluding 25.0% acquisitions, margin improved 90 bps 20.0% • Steam Specialties margin constant. Excluding 15.0% acquisitions +70 bps • WMFTG margin fell; 23.8% 23.6% 22.8% 22.5% 22.0% dilutionary impact 20.6% 20.6% 20.2% 10.0% of Aflex. Excluding 17.3% 17.1% Aflex, +40 bps 5.0% 0.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Reported Excluding acquisitions 7 2017 Results Year ended 31st December 2017 Engineering Opportunities
Currency movements FX translation impact on sales 2016-2018 Actual Projected 110 5% actual translation 2% projected translation tailwind on sales headwind on sales 105 100 95 90 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018 Yearly average exchange rate Based on Spirax Sarco sales-weighted currency translation index. 2018 rates assume that February rates prevail until the end of 2018 and compare with 2017 full year average exchange rates. 8 2017 Results Year ended 31st December 2017 Engineering Opportunities
Strong cash flow 31 st December 31 st December Adjusted cash flow Pounds (£) million 2017 2016 Adjusted operating profit* 235.5 180.6 • Good cash Depreciation and amortisation 31.6 25.6 generation; 86% Adjusted earnings before interest, tax, depreciation and amortisation 267.1 206.2 cash conversion Pensions/Share plans 4.7 3.5 • Working capital Working capital changes (34.2) 4.3 outflow Net capital expenditure (including software and development) (35.0) (31.3) • Dividends paid Cash from operations 202.6 182.7 £58.4m Net interest (6.4) - • Acquisitions of Income taxes paid (61.0) (56.5) £484.3m Free cash flow 135.2 126.2 Net dividends paid (58.4) (52.1) • 2017 closing net Proceeds from issue of shares/purchase of employee benefit trust shares 2.4 1.3 debt of £373.6m; 1.4xEBITDA Acquisitions (including costs) (484.3) (66.5) Other 1.2 1.8 • ROCE +500 bps Cash flow for the year (403.9) 10.7 • 2018 closing net Exchange movements 2.9 11.9 debt-to-EBITDA 1.0x Net (debt)/cash at 31 st December (373.6) 27.4 ROCE 52.9% 47.9% * See Appendix IV for definition of profit measures. 9 2017 Results Year ended 31st December 2017 Engineering Opportunities
Dividend growth 200.0 120p • Total dividend up 180.0 15% to 87.5p 160.0 100p • Final dividend up 16% to 62.0p 140.0 Pence per share • Dividend cover of 120.0 2.5x 100.0 • 50 years of dividend +15% progress with a +10% 80.0 25p +7% CAGR of 11% +9% +11% 60.0 +8% +14% +19% +8% 40.0 +11% 20.0 0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 DPS Interim DPS Final Special dividend 10 2017 Results Year ended 31st December 2017 Engineering Opportunities
Underlying margin factors Effects on underlying margins* 2017 2018 Currency movements Operating leverage Sales pricing (vs. inflation) Manufacturing strategies Business and product mix Business development investment Impact of acquisitions * The arrows as shown are qualitative and indicate direction only. 11 2017 Results Year ended 31st December 2017 Engineering Opportunities
Agenda 2017 Highlights Bill Whiteley 2017 Financial Review Operations and Outlook Nicholas Anderson 12 2017 Results Year ended 31st December 2017 Engineering Opportunities
Annual IP growth rates by quarter 2012-2017 Developed (OECD) Feb18 Emerging (Non-OECD) Feb18 Global Feb18 6.0% 5.0% 3.4% 4.0% 3.0% 2.0% 1.7% 1.0% 0.6% 0.0% -1.0% -2.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014 2015 2016 2017 Preliminary data Source: CHR Economics – February 2018 13 2017 Results Year ended 31st December 2017 Engineering Opportunities
Steam Specialties Europe, Middle East and Africa 31 st Dec 31 st Dec 2016 2017 Organic ⁺ Reported Exchange Organic Acquisitions Sales £234.3m £305.3m +5% +30% £12.4m £12.8m £45.8m Op profit* £50.0m £66.1m +7% +32% £5.4m £3.6m £7.1m Margin* 21.3% 21.7% +20 bps +40 bps ⁺ Organic measures are at constant currency and exclude acquisitions. * See Appendix IV for definition of adjusted profit measures. Organic sales up 5%; organic operating profit up 7% • Currency tailwind of 5% on sales and 11% on profits • Strong sales growth in Italy, France, Iberia, Benelux, Middle East • Sales broadly flat in Germany; UK and Nordics down • Gestra integrating well; adds 19% to sales, 13% to profit 30.5% • Margin 40 bps higher; +140 bps excluding acquisition • of Group sales Remain confident in our ability to deliver above market growth • 14 2017 Results Year ended 31st December 2017 Engineering Opportunities
Steam Specialties Asia Pacific 31 st Dec 31 st Dec 2016 2017 Organic ⁺ Reported Exchange Organic Acquisitions Sales £193.3m £218.0m +6% +13% £9.7m £12.9m £2.1m Op profit* £49.9m £56.9m +7% +14% £3.4m £3.6m £0.0m Margin* 25.8% 26.1% +10 bps +30 bps ⁺ Organic measures are at constant currency and exclude acquisitions. * See Appendix IV for definition of adjusted profit measures. Organic sales up 6%; organic operating profit up 7% • China performed strongly, self-generated sales drive growth • Solid growth in Korea driven by large Oil & Gas project • India progressing well; doubled sales, increased manufacturing volumes • China plant extension completed; new Singapore distribution centre • 22% Margin up 30 bps; up 60 bps excluding Gestra • Well positioned to make further progress • of Group sales 15 2017 Results Year ended 31st December 2017 Engineering Opportunities
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