Spirax Group plc. · LSE:SPX
Spirax — Spirax-Sarco Engineering — Investor Presentation (March 2018)
35 slides from Spirax's investor presentation, March 2018
Slide 1: Investor opportunities in our world-leading niche businesses
INVESTOR OPPORTUNITIES IN OUR WORLD-LEADING NICHE BUSINESSES 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 Investor opportunities March 2018 Engineerin
Slide 2: Group structure
Group structure Two world leading niche businesses A multi-national industrial engineering group that has its headquarters in Cheltenham, England 2017 Group Sales £999 million Spirax Sarco Watson-Marlow 25% 75% The global leader in the supply of Specialists in the design and engineered solutions for
Slide 3: Industrial and commercial steam systems; process heating and temperature management
Industrial and commercial steam systems Process heating and temperature Steam uses: heating and curing, cleaning, sterilisation, hot management solutions (from July 2017) water generation, space heating and humidification Uses: electric heating for mission-critical industrial Benefits of steam: high
Slide 4: Plant-wide applications: broad product range
Plant-wide applications Broad product range Our product range includes: steam traps, pressure and temperature control valves, condensate recovery pumps, strainers, separators, Pre-fabricated engineered packages for heat humidifiers, flow meters and boiler controls transfer & recovery and clean steam
Slide 5: Steam and condensate loop
Steam and condensate loop Applications overview Steam generation Steam distribution and utilisation Packaged Solutions & Energy Recovery Feedwater Boiler level Bottom Start-up systems Pressure control Flow metering Steam traps Ancillaries Humidification Heat transfer Flash steam Condensate supply, s
Slide 6: Plant-wide applications: broad product range
Plant-wide applications Broad product range Our product range includes: process heaters, air heaters, radiant heaters, tubular heaters, Pre-fabricated engineered packages for process cartridge heaters, power and temperature heating and temperature management controls, temperature sensors, thermostat
Slide 7: Chromalox expands our addressable market
Chromalox expands our addressable market Thermal Energy Management: electricity and steam have complementary uses. The choice between heating mediums is driven by application needs or customer circumstances 6 Investor opportunities March 2018 Engineering Opportunities
Slide 8: Watson-Marlow pumps and systems
Watson-Marlow pumps and systems Cost-effective solutions for difficult applications Watson-Marlow Peristaltic pumps Business built around unique pumping and niche fluid path Peristaltic principle technologies Rotor shoes/rollers squeeze tubing for gentle pumping action Contamination free No moving p
Slide 9: Watson-Marlow pumps and systems
Watson-Marlow pumps and systems Cost-effective solutions for difficult applications Dirty applications: the fluid does not touch the pump Making peristaltic pumps suitable for dirty fluids which contaminate other pumps – slurries, pigments, effluent applications. No need to strip or clean the pump;
Slide 10: Watson-Marlow Fluid Technology Group
Watson-Marlow Fluid Technology Group Ten brands offering customers an unrivalled breadth of pumping services Low-flow peristaltic High-flow industrial Low-flow, high precision metering pumps Precision pump and hose pumps OEM pumps Aseptic filling (acquired in 1990) transfer tubing (acquired 1996) (a
Slide 11: Our direct sales business model
Our direct sales business model Positioning us well to create value Customer needs: We help our customers to solve their difficult productivity and process challenges, improve their operational sustainability and comply with increasingly stringent health, safety and environmental requirements. Custo
Slide 12: Our business model in action
Our business model in action Creating value for customers We use our… • specialist knowledge (local direct sales engineers are skilled specialists in applications and systems) • technical expertise (focus our selling on application merits and payback, not price) • engineered solutions (industry lead
Slide 13: Customer capex vs opex spend
Customer capex vs opex spend Sales by value driver* Maintenance and 85% repair sales that maintain existing systems, supported by the end users’ opex of Group revenue is generated budgets, with a typical from annual maintenance and invoice value of around £1k operational budgets 15% Small project sa
Slide 14: Diverse markets and broad customer base
Diverse markets and broad customer base A source of resilience Food c.50% of Group Beverage 1% 14% revenue derived 18% Pharmaceutical & Biotechnology 1% from defensive, less 2% OEM machinery cyclical, end Oil & Gas markets 3% 3% Chemical 3% Healthcare 85% of Group 4% Group Sales Power Generation rev
Slide 15: Our diverse markets
Our diverse markets Food Beverage Pharmaceutical & OEM Machinery Oil & Gas Healthcare Steam is used for Steam is essential for Biotechnology Original Equipment Electrical heating products Steam is used in hospitals blanching, cooking, baking, brewing and distilling Clean steam reduces the Manufactur
Slide 16: Our unique global coverage and expansion
Our unique global coverage and expansion 114 operating units* in 47 countries * Operating units are business units that invoice locally, includes Associate (at time of publication) 44 new operating units established or acquired in the 3 years to March 2018. Steam Specialties: SxS: Colombia, Brazil (
Slide 17: Regional manufacturing strategy
Regional manufacturing strategy Local product availability EMEA: UK Italy France (SxS and Chromalox) Germany (Gestra) UK (WM, BioPure and Aflex) Netherlands (Bredel) Germany (MasoSine) Denmark (Flexicon) Sweden (Alitea) Americas: USA (SxS and Chromalox) Argentina Brazil Mexico (SxS and Chromalox) US
Slide 18: Group geographic revenues, 2017
Group geographic revenues, 2017 Good regional coverage EMEA 42% (2016: 42%) Emerging markets 6% (2016: 7%) Americas 34% (2016: 29%) Emerging markets 7% (2016: 8%) Asia Pacific 24% (2016: 29%) Emerging markets 21% (2016: 24%) 2017 emerging markets: 34% of sales and 38% of operating profit Sales and p
Slide 19: £8.2 billion market size
£8.2 billion market size 13% market share £1.4bn Condensate Watson-Marlow Steam Specialties Management market share 19% market 9% market products Niche pumps and associated share 26% market equipment market £1.8bn Thermal share Energy Chromalox Management market share 6% £1.3bn £4.5bn products £4.5
Slide 20: Our strategy
Our strategy Objective: self-generated growth that outperforms our markets Focus: doing better what we already do well Our six Group strategic themes reflect the key elements of the Spirax Sarco business strategy, the Watson-Marlow Fluid Technology Group strategy and the Group acquisitions strategy:
Slide 21: Six strategic themes
Six strategic themes 1. Increase direct sales 2. Develop the knowledge 3. Broaden our global effectiveness through and skills of our expert presence sector focus sales and service teams • Expand sector focus of the • Continually improve technical • Maximise first-to-market direct sales force compete
Slide 22: Six strategic themes
Six strategic themes 4. Leverage R&D 5. Optimise supply chain 6. Operate sustainably and investments effectiveness help improve our • Leverage R&D to accelerate • Invest in regionalised customers’ sustainability growth manufacturing strategy • Increase our sustainability • Shorter time-to-market for
Slide 23: 2017 Acquisitions
2017 Acquisitions Highly complementary to the Steam Specialties business • Leader in advanced industrial boiler • Market leading provider of electrical control systems; designs and produces solutions for industrial process heating valves and controls for steam and fluid and temperature management pr
Slide 24: Strong history of sales growth and margin expansion
Strong history of sales growth Good operating profit margin expansion 7% CAGR over the 10 30% Sales £1,000 years to 2016; step up Sales from acquisitions, 2017 28% Reported profit margin from acquisitions in 2017 £900 Margin excluding acquisitions, 2017 26% £800 Margin increased from 24% £700 Sales
Slide 25: Drivers of strong growth
Drivers of strong growth Organic growth drivers: Inorganic growth drivers: Internal Bolt-on or related acquisitions - Geographic expansion - New technologies - New product development - Increased geographic coverage - Business strategy - Expansion of addressable market - Regional manufacturing strat
Slide 26: Delivering shareholder value
Delivering shareholder value EPS and DPS growth; 50 year dividend progress 250.0 Dividend CAGR: 11% over 10 years, 10% over 35 years EPS and 11% over 50 years 200.0 DPS * Plus special dividends of 25p in 2010, 100p in 2012 and 120p in 2014 p/share 150.0 * * 100.0 * 50.0 0.0 1982 1983 1984 1985 1986
Slide 27: Strong cash generation
Strong cash generation Cash utilisation 2012-2016 Cash flow* Cash conversion 2013 £127.8m 94% 2014 £121.5m 86% 2015 £133.9m 95% 2016 £157.5m 101% 2017 £170.2m 86% Capital expenditure * Note: Cash flow is the adjusted operating cash flow plus capital Acquisitions less divestments expenditure less tax
Slide 28: Summary
Spirax-Sarco Engineering plc Summary • Two world leading niche engineering businesses • Diversity of end users, customers, geographies and products, plus high replacement content, yields a resilient business model • Direct sales model key to delivering customer value • Excellent record of sales grow
Slide 29: Appendices
Appendices Spirax-Sarco Engineering plc headquarters, Charlton House, Cheltenham, UK 28 Investor opportunities March 2018 Engineering Opportunities
Slide 30: 2017 Full Year Results
2017 Full Year Results 2017 2016 • Organic sales growth of 6% Revenue £998.7m £757.4m • Adjusted operating margin of Organic revenue growth⁺ +6% +4% 23.6% • Good growth in Steam Operating profit* £235.5m £180.6m Specialties and Watson- Operating profit margin* 23.6% 23.8% Marlow Profit before taxati
Slide 31: Fletcher International Exports
Fletcher International Exports Saves energy and reduces costs with engineered solutions from Spirax Sarco Australia • Problem: high energy costs • Requirement: increase energy efficiency and reduce gas consumption • Solution: recover flash steam for reuse in other processes; increase condensate retu
Slide 32: RVA Synergies Ltd
RVA Synergies Ltd Incorporates Watson-Marlow OEM pump head in low-noise drilling system for use in hostage and surveillance situations • Problem: pump needed to supply cooling water to diamond core drill as it bores through walls • Requirement: a quiet, compact, low-flow capacity and reliable pump f
Slide 33: Canadian railway terminal
Canadian railway terminal Chromalox heat trace solution keeps oil flowing • Problem: oil transfer at a Canadian railway terminal, in temperatures as low as -40°C • Requirement: cost-effective electric heat trace solution to gently warm oil and maintain flow rates • Solution: fully monitored heat tra
Slide 34: Group competitors
Group competitors EMEA Asia Pacific Americas Spirax Sarco Steam Specialties Armstrong International (USA) Private ARI Armaturen (Germany) Private TLV (Japan) Private Forbes Marshall (India) Private Spence/Nicholson (USA) Circor: NYSE Other product specialists: Samson (Germa
Slide 35: Group competitors
Group competitors EMEA Asia Pacific Americas Chromalox Watlow Electric Manufacturing Company (USA) Private BARTEC (Germany) Private Equity Vulcanic, (France) Private Equity EXHEAT Limited (UK) Private Pentair – electrical division (USA) Public: NYSE Thermon Group Holdings I
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