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2011 Results 31 st December 2011

2011 Results 31 st December 2011. Bill Whiteley - Chairman Mark Vernon – Chief Executive David Meredith – Finance Director. Overview of 2011 results. Sales up 10% - widespread growth Operating profit margin of 20.6% - tenth consecutive year of improvement Good operational gearing

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2011 Results 31 st December 2011

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  1. 2011 Results 31st December 2011 Bill Whiteley - Chairman Mark Vernon – Chief Executive David Meredith – Finance Director

  2. Overview of 2011 results • Sales up 10% - widespread growth • Operating profit margin of 20.6% - tenth consecutive year of improvement • Good operational gearing • Emerging markets 47% of operating profit • Watson-Marlow sales up 15% • Total dividend up 14% * See Appendix IV for definition of profit measures

  3. Segment revenue changes Asia Watson- EMEA Pacific Americas Marlow FX Sales 2011 EMEA Asia Pac Americas WM Total +9% +10% +7% +1% +15% £m 250.1 147.1 134.4 118.4 650.0 £17.2m £15.8m £12.0m £12.0m £m Organic sales increase over 2010 Steam Specialties +8% Watson-Marlow +15% £3.2m % Change v 2010 H1 H2 Year Organic Sales +10% +9% +9.5% Acquisitions/Disposals +1% -1% +0.1% FX +0% +1% +0.6% TOTAL +11% +9% +10.2% Based on sales at constant currency

  4. Segment operating profit changes Asia Watson- EMEA Pacific Americas Marlow FX Profit2011 EMEA Asia Pac Americas WM Corp Exp Total +7% +17% +13% +0% +15% £m 42.5 37.8 27.4 34.4 -8.1 134.0 £4.8m £4.5m £4.1m Mexico £m £2.4m £0.2m % Change v 2010 H1 H2 Year Operating profit +14% +11% +12% Op. margin 2011 19.9% 21.3% 20.6% Op. margin 2010 19.3% 21.0% 20.2% Based on adjusted profit at constant currency - see Appendix IV

  5. Profit bridge2010 to 2011 * See Appendix IV for definition of profit measures

  6. Financial aspects • Record operating profit margin • Improved finance income – DB pensions • Reduced tax rate • FX immaterial * See Appendix IV for definition of profit measures

  7. Operating profit marginExceeding 20% in last two years * See Appendix IV for definition of profit measures

  8. Cash flow • Working capital outflow – sales growth and higher stocks • Exceptionally high capex – over £43m • £25m increase in dividend payments to £53m – including special dividend • Closing net cash £12m * See Appendix IV for definition of profit measures

  9. Long history of dividend growth10% pa growth in most recent decade • 44 year dividend record with 11% CAGR Legend Dividend increase % Special dividend DPS Final DPS Interim Penceper share

  10. Key performance indicators App I ROCE App II Cash App III FX App IV Adj’d profit • Good organic sales growth • Record operating profit margin • Exceptionally high capital investment (£43m) • Increased stocks impacted balance sheet metrics * See Appendix IV for definition of profit measures

  11. Underlying operating margin factors Effects on underlying margin* Higher impacts Lower impacts * The arrows as shown are qualitative and indicate direction only

  12. Europe, Middle East & Africa (EMEA) • Trading conditions remain challenging broadly across Europe • Second half sales benefited from backlog reduction • Emerging markets generated 60% of profit increase • Added sales resource in emerging markets – good long term prospects • 2011 includes net benefit of £1.7m • Cheltenham manufacturing site consolidation completed • Lower profits in manufacturing operations *Based on adjusted Operating profit – see Appendix IV

  13. Asia Pacific • Strong underlying demand broadly across Asia – Thailand hurt by floods • Healthy quote logs • Widespread sales growth except Japan and Korea • Excellent growth in China – 9% of Group sales (including Watson-Marlow) • Increasing output from Shanghai factory • Strong sales and profit growth in Southeast Asia • Continued strong margins at 25.7% (underlying 2010 margin 24.5%) *Based on adjusted Operating profit – see Appendix IV

  14. Americas • Good sales growth – contribution from Mexico • Stable market conditions but continued low levels of maintenance spending in US • Higher metering sales from US government energy management programme • US sales (including Watson-Marlow) 17% of total Group • Good prospects in Canada from oil sands development • Sustained excellent profit performance in Brazil • Operating profit margin improved to 20.4% – US big contributor *Based on adjusted Operating profit – see Appendix IV

  15. Watson-Marlow Pumps • Strong 15% sales growth – widespread across geographies and products • Continued expansion of geographic coverage and sector-focused sales resource • Further integration and development of recent acquisitions • Exceptional project activity in Q4 in US – some benefit in 2011 • Emerging markets contributing to growth – new sales operation in India • Significantly higher R&D expenditure – new products to launch in 2012 • FX headwind from weaker US dollar – margins still very healthy at 29.1% *Based on adjusted Operating profit – see Appendix IV

  16. Watson-Marlow opportunitiesUnique applications for growth Single-use systems High purity biopharmaceuticals manufacturers switching to disposable single-use tubing and systems to reduce validation costs – opportunities for higher tubing and tubing assembly sales. Point-of-sale paint manufactureBlending of raw materials to produce base paint at point-of-sale. Bredel hose pumps supplied for modular skid system. Pumping cheese Low shear MasoSine pumps ideal for manufacture of Mozzarella cheese in US – application now replicated in other countries Ablation tip cooling Microflow Alitea pump heads feed cooling fluid to catheter tip to minimise tissue damage during microwave frequency surgery

  17. Group geographic revenuesEmerging markets contributing to growth EMEA 47% (2010: 48%) Emerging markets 9% (2010: 8%) Asia Pacific 25% (2010: 24%) Americas 28% (2010: 28%) Emerging markets 20% (2010: 19%) Emerging markets 9% (2010: 9%) 19% 13% 12% 5% 3% 1% Sales are by geographical location of operations

  18. Emerging marketsContributing to growth • Long history in BRIC markets: • Brazil 1959 (53 years) • Russia 1996 (16 years) • India 1959 (53 years) • China 1995 (17 years) • Total emerging markets generated 47% of profit in 2011 • Long history in BRIC markets • China 9% of Group sales in 2011 • Sales in ‘newly-emerging’ markets up 37% in 2011 • Direct sales approach in most newly-emerging markets 28% 38% • Sales in “newly emerging” markets grew 37% in 2011 including: • Indonesia, Philippines, Vietnam • Saudi Arabia, UAE, Kuwait • Hungary, Ukraine, Romania • Colombia, Chile, Peru, Bolivia • Egypt, Kenya, Nigeria, Uganda • Honduras, El Salvador

  19. Summary • Sales growth of 10% – well spread across all segments • Record operating profit and margin (20.6%) • Continued investment in market penetration, geographic expansion and new product development • R&D expenditure up 23% • Strong balance sheet – net cash £12m • Total dividend up 14% – £53 million in dividend payments in 2011 • Expect further progress in 2012

  20. Spirax-Sarco Engineering plc2011 Results 31st December Focused on consistent growthand creating shareholder value

  21. Appendix I -Return on capital employed * See Appendix IV for definition of profit measures

  22. Appendix II -Cash conversion • See Appendix IV for definition of profit measures • ** Property, plant, equipment, software and development

  23. Appendix III -Currencies FX movements overall immaterial to profit in 2011 – weaker dollar matched by gains elsewhere

  24. Appendix IV -2011 Note on profit measures All profit measures exclude the amortisation of acquisition-related intangible assets of £4.4m (2010: £4.0m) of which £0.4m (2010: £0.4m) relates to Associates, and acquisition and disposal costs of £0.4m (2010: £0.2m). 2010 excludes the impairment of acquisition-related intangible assets of £2.1m and the gain of £8.2m on revaluation of investment of a company previously treated as an Associate.

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