Annual General Meeting Charlton House, Cheltenham 15 th May 2018 Clive Watson Trudy Schoolenberg Jane Kingston Peter France Bill Whiteley Jamie Pike Jay Whalen Nicholas Anderson Kevin Boyd Neil Daws Engineering Opportunities 0 Annual General Meeting May 2018
2017 Results Strong organic growth and two significant acquisitions 2017 2016 Reported Organic ⁺ Revenue £998.7m £757.4m +32% +6% Operating profit* £235.5m £180.6m +30% +6% Operating profit margin* 23.6% 23.8% -20 bps +0 bps Pre-tax profit* £229.1m £177.9m +29% EPS* 220.5p 171.5p +29% DPS 87.5p 76.0p +15% ⁺ Organic measures are at constant currency and exclude acquisitions. * A djusted profit measures. • Sales growth 32%; organic 6% • Adjusted operating margin of 23.6% • Good growth in Steam Specialties and Watson-Marlow • Acquisitions performing in line with plan; adding 20% to sales, 14% to profit • Net debt of £373.6 million, 1.4x EBITDA • Full Year dividend increased by 15% Engineering Opportunities 1 Annual General Meeting May 2018
Sales growth 2011-2017 32.0 Organic Acq'n/Disp Exchange Reported 28.0 24.0 20.0 Sales growth % 16.0 12.0 8.0 4.0 0.0 -4.0 -8.0 2011 2012 2013 2014 2015 2016 2017 Engineering Opportunities 2 Annual General Meeting May 2018
Engineering opportunities… through acquisitions Highly complementary to the Steam Specialties business • Market leading provider of electrical • Leader in advanced industrial boiler solutions for industrial process heating control systems; designs and produces and temperature management valves and controls for steam and fluid process control • Transaction Enterprise Value US$415 million • Transaction Enterprise Value €186 million • Multiple of 9.7x EBITDA 2016 • Multiple of 11.2x EBITDA 2016 • 2016 performance: revenue US$201 • 2016 performance: revenue €92.5 million; EBITDA US$43 million; EBIT million; EBITDA €16.6 million; EBIT €15.2 US$37 million million • Expands Spirax-Sarco’s addressable • Increases Steam Specialties market share market by over £2 billion Engineering Opportunities 3 Annual General Meeting May 2018
Expanding our addressable market Watson-Marlow Steam Specialties market share 19% market Watson-Marlow Steam Specialties Niche pumps and market share market associated equipment 18% market Niche pumps Chromalox and associated £1.3bn market share 6% equipment market £4.5bn £1.3bn New addressable 2016 addressable market £2.4bn £4.5bn market Acquisitions £8.2bn £5.8 billion Spirax Sarco Electrical thermal energy Steam Specialties market share 13% management market market share 16% Source: based on Spirax Sarco internal estimates Engineering Opportunities 4 Annual General Meeting May 2018
Broadening the platform for future organic growth 7% CAGR over the 10 30% £1,000 Sales years to 2016; step up Sales from acquisitions, 2017 28% £900 Reported profit margin from acquisitions in 2017 Margin excluding acquisitions, 2017 26% £800 Margin increased from Sales £ millions 24% £700 Profit margin % 16.5% to 23.6% 22% £600 20% £500 18% £400 25 year average 16% £300 14% £200 12% £100 10% £0 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Sterling weakens Sterling strengthens Sterling weakens Sterling Sterling Sales prior to 2004 have been adjusted to IFRS strengthens weakens Engineering Opportunities 5 Annual General Meeting May 2018
Related acquisition Chromalox: strong strategic fit with long-term potential Group acquisition strategy: Related acquisition: expands addressable market and accelerates opportunities for growth 1. Create significant shareholder value Direct sales business model 2. Increase our addressable Provide products or services where there is a high cost market into related of non-performance to the customer sectors Increase sales in our core markets 3. Expand the capabilities Potential for geographical or technology expansion of our niche businesses Capable of achieving Group margins through new technologies, skills or Strong MRO content and recurring revenues geographic coverage Source: Acquisition criteria as set out in the Group’s 2014 Annual Report Engineering Opportunities 6 Annual General Meeting May 2018
Complementary technologies • Thermal Energy Management: electricity and steam have complementary uses • Choice between heating mediums driven by application needs or customer circumstances Engineering Opportunities 7 Annual General Meeting May 2018
Broad product range Product range includes: process heaters, air Pre-fabricated engineered packages for process heaters, radiant heaters, tubular heaters, cartridge heaters, power and temperature heating and temperature management controls, temperature sensors, thermostats and heat trace cables and connection kits Fuel Gas Conditioning System Process Heating Packages Heat Transfer System Provides advanced thermal technologies engineered for the world’s toughest industrial heating applications Engineering Opportunities 8 Annual General Meeting May 2018
Direct sales business model Market diversity 1% 1% 1% 12% 17% 21% 2% 33% 35% 3% Customer Revenue Routes to 6% Routes to Opex/Capex by industry 16% market market 6% spend 2017 8% 79% 15% 11% 32% Opex budgets Direct: End Users & Contractors Capex budgets Direct: OEMs Distributors Average Invoice Value US$ Industrial Heaters & Systems 3.3k 15,000 directly Heat Trace 1.4k purchasing customers Component Technologies 1.0k Engineering Opportunities 9 Annual General Meeting May 2018
Awards and achievements • Spirax-Sarco Engineering plc voted top of its sector (Engineering and Machinery) • Recognised as Britain’s 3rd Most Admired Company • Peer review by senior executives from 230 companies, in 24 sectors, and analysts from leading City investment firms • Criteria include: quality of management; financial soundness; quality of goods and services; ability to attract, retain and develop top talent; value as a long-term investment; innovation; and corporate governance • Watson-Marlow Ltd honoured with a Queen’s Award for Enterprise: Innovation 2018 • Awarded for the development of Qdos, the world's first self-contained, chemical metering pump • The award recognises companies or products that show outstanding commercial success as a result of innovation Engineering Opportunities 10 Annual General Meeting May 2018
Questions Steam Training Centre, Spirax Sarco China Engineering Opportunities 11 Annual General Meeting May 2018
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