Spirax Sarco 2000 Preliminary results

1
Spirax Sarco2000 Preliminary results

• Tim Fortune - Chairman
• Marcus Steel - Chief Executive
• David Meredith - Director - Finance
• March 2001

www.SpiraxSarcoEngineering.com
2
Agenda

• Overview of 2000 Tim Fortune
• Business review Marcus Steel
• Financial review David Meredith
• Strategy overview Marcus Steel
• Prospects Tim Fortune
• Questions

3
Overview of 2000

• 2000 1999 Change
• Turnover 278.1m 258.9m 7
• Operating profit 43.4m 42.7m 2
• Margin 15.6 16.5
• Pre-tax profit 41.2m 41.8m -1
• EPS 37.4p 36.1p 4
• DPS 18.0p 17.3p 4
• After charging goodwill amortisation of 0.4m
  (1999 0.2m)
• Good organic sales growth of 6
• Strong performance in Asia
• UK and Latin America weak
• Good underlying progress in Continental Europe
  and North America
• Margin in Continental Europe impacted by
  exchange rates
• Adjusted EPS 4
• Note Pre-tax profit and EPS are shown before the
  non-operating item

4
Geographical analysis of turnover
United Kingdom 13
Americas 30
Continental Europe 34
Asia, Australasia, and Africa 23
5
Sales changes
1999 Asia, 2000 sales Australasia
Continental Americas UK Exchange sales
and Africa Europe
m
278.1m
0.7m
5.5m
-0.7m
6.2m
7.5m
258.9m
First half Second half Year Sales
growth 7 6 6 Acquisitions 1 1 1 Exchan
ge -2 2 0 6 9 7
Note Sales are to third parties based on the
geographical location of the customer
Geographical splits are shown at constant
exchange rates
6
Operating profit changes
Asia, 1999 Australasia
2000
2000 profit Africa C. Europe Americas
UK profit Exchange Goodwill
profit
m
0.6m
0.8m
45.0m
1.5m
-0.6m
43.4m
42.7m
-1.5m
-0.1m
H1 H2 Year Operating profit 1 2 2 Margin
(99) 15.1 17.8 16.5 Margin (00) 14.4
16.7 15.6
Note Geographical splits are shown at constant
exchange rates
7
UK
Employees 1108
2000 1999 change Sales 86.8m 81.5m
7 Operating profit 11.9m 12.5m
-5 Margin 13.7 15.3

• Good demand on factories especially from Asia
• Improved productivity
• Weak domestic market
• Lower sales and profits in domestic UK

8
Factory productivity

• UK factory productivity up 5
• Example of automated assembly and testing-
• Saved labour
• Improved quality
• Increased output
• Production engineering teams
• Targeted productivity improvements
• Consistent improvements over many years

9
Continental Europe
Employees 1058
2000 1999 change Sales 114.1m 110.2m
4 Operating profit 13.5m 15.0m
-10 Margin 11.8 13.6

• 6 organic sales growth
• 2 small acquisitions - Sweden Italy
• 5 underlying operating profit growth
• Adverse exchange impact 2¼ million
• Factories busy - some production
  rationalisation

10
System control instrumentation - Fieldbus
SCADA

• Grappa distillery in Italy
• Spirax specification of full system
• Spirax provided
• Valves other equipment
• Full control system - Fieldbus
  SCADA
• Product interfacing
• Alliance with SMAR
• Growing number of applications

11
Americas
Employees 880
2000 1999 change Sales 88.1m 77.7m 13
Operating profit 8.1m 7.3m
11 Margin 9.2 9.4

• Good sales growth in USA
• Difficult markets in Latin America
• Improved performance in South Carolina

12
Steam condensate system optimisation

• UK
• Grangemouth
• Coryton
• Australia
• Kwinana
• USA
• Texas City - Chemicals plant
• Texas City - Refinery
• More to come

IN PARTNERSHIP
13
Asia, Australasia and Africa
Employees 868
2000 1999 change Sales 57.3m 47.6m
20 Operating profit 9.9m 7.9m
24 Margin 17.3 16.7

• Recovery in Asian economies
• Excellent sales and profit growth
• Strong performances in Korea, China Japan
• Exchange gains 0.4 million

14
Co-operation with Toyota

• Success in Japan at Toyota
• 4 Year project to improve output of plastic
  moulding plant for spoilers
• Switched from electric to steam heating,
  collaborated on design
• Benefits-
• Reduced energy consumption
• Reduced start up time
• Reduced process time

15
Financial issues

• m 2000 1999 change
• Sales 278.1 258.9 7
• Operating profit 43.4 42.7 2
• Margin 15.6 16.5
• Non-operating item (1.0) -
• Interest (2.2) (1.0)
• Profit before tax 41.2 41.8 -1
• Tax rate 30.1 30.4
• EPS 37.4p 36.1p 4
• DPS 18.0p 17.3p 4
• Loss on sale of property in USA 1.0m
• 1.0m extra interest due to share buy-back
• 1½m exchange hit - mostly transaction effect

2000 figures are shown before the non-operating
item
16
Productivity
Sales
7
3
Employees
4
Sales / employee
17
Cash flow
20 10 0 -10 -20 -30 -40 -50
m
43
-3
-5
-8
-10
-35
-28
-46
Net Operating Other Share Acquisitions Net
Interest, Net debt cash flow buy-back
capital tax, debt 31.12.99 /issued
expenditure dividends 31.12.00
18
Key statistics

• 2000 1999
• Net debt 45.6m 34.8m
• Net gearing 34 28
• Interest cover 20x 44x
• Dividend cover 2.09x 2.15x
• Capital expenditure / depreciation 149 149
• Goodwill amortisation 0.4m 0.2m
• Operating cash flow 43.4m 42.1m
• 2000 figures are before the non-operating item

19
Strategy - overview
Focus on large industrial steam and peristaltic
pumping markets

• Growth through-
• Market share expansion
• Wider product range
• Geographic expansion
• Focus on specific market segments
• Acquisitions

20
Serving a wide range of industries

• Food and drinks
• Pharmaceuticals
• Oil refining
• Chemicals
• Plastics
• Pulp and paper
• Sugar refining
• Textiles
• Metal processing
• Rubber and tyres
• Sterilising
• Printing
• Hospitals
• Commercial building
• Laundries
• Shipbuilding
• Electronics
• Water treatment

21
Strategy - market share expansion

• Knowledge, Service and Products
• Lower energy costs
• Increased productivity
• Improved quality / repeatability
• Lower support costs
• Overall increased efficiency and cost
  effectiveness
• Payback
• Global support
• Increased sales coverage
• More competitive production
• Use of IT and internet technology internally
  and externally
• New customers converting to peristaltic pumps

22
Spiraxs marine steam knowledge aided ship design
in Norway

• Clean steam reboiler controls
• Complete humidification system
• Process controls
• Condensate pumping system

23
Strategy - new products developments

• Packaged modules - Alfa Laval alliance
• Controls actuators
• Safety valves
• Steam system services
• High pressure
• Isolation valves

C series cage design valve
SP2 smart positioner

• Electronic instrumentation
  SCADA systems
• Self monitoring steam traps

PC connectors
APT automatic pump traps
WMB 620 series pump
24
Strategy - geographic expansion

• China
• Eastern Europe
• Indo-China
• Parts of South America
• Middle East
• Major markets - USA, Germany, Japan where we
  have small market shares
• Watson-Marlow Bredel - USA, Europe and
  International

25
Strategy - market segments

• OEMs
• Oil and Petrochemical
• Clean / pure steam e.g. Food, pharmaceutical,
  biotech, etc.
• Combined Heat and Power
• Process applications
• Systems integrators
• Contractors

26
Pure steam application at Samsung
Pure steam humidification is important in
semiconductor manufacture Steam must be extremely
pure to guarantee product quality
Supplied pure steam generators and humidifiers to
Samsung in Korea Spirax offers a range of
stainless steel clean steam products
27
Spirax Sarco

• Focused on growth and
• creating shareholder value

28
Appendix - EPS and dividends
Pence per share
Key EPS DPS
33.8 38.0 38.3
34.5 36.1 37.4 17.8 18.6
21.6 27.9
13.2 14.8 15.8 16.5
17.3 18.0 9.0 9.3 9.9
11.5
1991 1992 1993 1994 1995 1996
1997 1998 1999 2000
Note Figures exclude non-operating and
exceptional items
29
Appendix - Share buy-back

• Shares Value m
• 1998 1,160,000 6.1
• 1999 4,505,032 22.6
• 2000 1,665,000 5.9
• Total 7,330,032 34.6
• Shares in issue
• 31st December 2000 73,592,036
• Average shares in issue
• 2000 74,531,906
• 1999 77,934,804
• 1998 79,854,550

30
Appendix - Currencies

• Year 1999 First half 2000 Year 2000
• Average Exchange rates
• Bank of England sterling index 103.70 108.30 107.7
  0
• US 1.62 1.57 1.52
• Euro 1.52 1.64 1.64
• DM 2.97 3.21 3.21
• FFr 9.96 10.76 10.77
• Lira 2,940.01 3,175.40 3,178.55
• Won 1,923.33 1,758.33 1,731.32
• Period End Exchange rates
• Bank of England sterling index 107.20 104.30 105.4
  0
• US 1.61 1.51 1.49
• Euro 1.61 1.58 1.59
• DM 3.14 3.09 3.11
• FFr 10.55 10.36 10.44
• Lira 3,113.37 3,057.98 3,080.79
• Won 1,825.73 1,687.98 1,889.66