SpiraxSarco Engineering

1
Spirax-Sarco Engineering

• 2004 Interim Results
• September 2004

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2004 Interim results

• Marcus Steel - Chief Executive
• David Meredith - Director - Finance
• September 2004

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Overview of 2004

• 2004 2003 Change
• Turnover 157.7m 154.0m 2.4
• Operating profit 23.4m 20.3m 15.6
• Margin 14.9 13.2
• Pre-tax profit 23.1m 19.6m 18.2
• EPS 19.6p 17.2p 14.0
• DPS 6.3p 6.0p 5.0
• After charging goodwill amortisation of 0.3m
  (2003 0.3m)

• Good organic sales growth of 7
• Strong performances in Asia and Americas
• Margin increased to 14.9
• Good cash flow and reduced net debt
• Interim dividend up 5

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Geographical analysis of turnover
United Kingdom 13 (13)
Americas 25 (26)
Continental Europe 38 (39)
Asia, Australasia, and Africa 24 (22)
Turnover is by geographical location of the
customer
www.SpiraxSarcoEngineering.com
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Sales changes
Asia Continental Australasia Currency Total
UK Europe Americas Africa -0.4m 1.5m 4.1
m 5.1m -6.5m 3.7m
m
/- YOY Organic Sales 7 Exchange -4 2.
4
Note Sales are to third parties based on the
geographical location of the customer.
Geographical splits are shown at constant
exchange rates.
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Operating profit changes
Continental Americas
Asia Currency Total UK
Europe 1.4m Australasia
Impact 3.2m 0.1m 1.6m
Africa -1.3m
1.4m
m
/- YOY Operating profit 15.6 Operating
margin 2004 14.9 Operating margin 2003
13.2
Note Geographical splits are shown at
constant exchange rates.
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UK
2004 2003 change change excl XR Sales to
customers 20.2m 20.6m -2 -2 Sales by
operation 49.1m 47.1m 4 4 Operating
profit 4.1m 3.9m 6 3 Margin 8.4 8.3

• UK domestic market remains quiet, sales down 2
• Increased demand on factories from overseas
  markets
• Profits up 6 - demand increase cost controls
• Asian material resourcing extended, steel costs
  increased

Sales by operation comprise sales to customers
plus intra-group sales
www.SpiraxSarcoEngineering.com
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Surface Specialities plccellulose film
production - UK

• Leading producer of cellulose film for food
  packaging and adhesive tape
• Highly toxic and corrosive fluids are used in
  production
• Peristaltic pumps contain difficult fluids within
  the tube with high accuracy and are easy to use
• Improved reliability in this hostile environment
  gave higher productivity
• Henry Routley, process development manager
  Watson-Marlow Bredel gives us the performance we
  require the new 520 pump is the best unit Ive
  seen to date

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Continental Europe
2004 2003 change change excl XR Sales to
customers 60.5m 60.1m 1 3 Sales by
operation 74.2m 74.6m -1 1 Operating
profit 9.3m 7.6m 22 20 Margin 12.5 1
0.2

• European markets generally weak
• Organic third party sales grew 3 - Scandinavia,
  France, Spain
• Germany Italy flat sales
• Non-repeat of 1.5m Spanish factory closure costs
  in 2003
• Underlying profit up 1

Sales by operation comprise sales to customers
plus intra-group sales
www.SpiraxSarcoEngineering.com
10
Bäckhammars Bruk,paper pulp drying - Sweden

• Paper industry is a heavy steam user
• This mill produces over a quarter of a million
  tonnes of pulp and paper every year and uses over
  150 tonnes of steam every hour
• Spirax Sarco redesigned the system to drain
  condensate from air heaters used to dry pulp
• Fuel oil savings of SEK 1 million (75k) per year
• Process capacity increased by 30
• Excellent payback for customer

11
Americas
2004 2003 change change excl XR Sales to
customers 39.5m 39.2m 1 11 Sales by
operation 41.6m 41.5m 0 11 Operating
profit 4.7m 4.3m
10 34 Margin 11.3 10.4

• Organic sales up 11
• All companies increased sales
• USA sales and profits well ahead
• Good results in Canada, Brazil and Argentina
• Profit reduced by exchange, underlying profit
  up by 34

Sales by operation comprise sales to customers
plus intra-group sales
www.SpiraxSarcoEngineering.com
12
Bulk chocolate manufacture - USA

• Cocoa beans are roasted using high pressure
  superheated steam
• Spirax Sarco beat the competition to provide two
  engineered packages for effective recovery of
  condensate
• Energy efficiency improvements enabled the
  customer to shut down one boiler altogether
  providing significant fuel and operational
  savings
• Packaged system provided simplified installation
  and reduced maintenance costs
• Savings of 2.5 million per year with an IRR of
  365 and payback of 3 months
• Solution led to many further selling opportunities

13
Asia, Australasia and Africa
2004 2003 change change excl XR Sales to
customers 37.6m 34.1m 10 16 Sales by
operation 34.0m 31.0m 10 16 Operating
profit 5.3m 4.5m 19 31 Margin 15.7 1
4.4

• Regional economies generally good
• Organic sales grew by 16, across most
  territories
• Underlying operating profit up 31
• Margin up strongly due to higher sales and
  despite exchange hit

Sales by operation comprise sales to customers
plus intra-group sales
www.SpiraxSarcoEngineering.com
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Financial aspects

• m 2004 2003 change
• Sales 157.7 154.0 2.4
• Operating profit 23.4 20.3 15.6
• Margin 14.9 13.2
• Interest (0.3) (0.7)
• Profit before tax 23.1 19.6 18.2
• Tax rate 34 33
• EPS 19.6p 17.2p 14.0
• DPS 6.3p 6.0p 5.0
• Underlying margin up from 14.1 to 14.9
• Lower interest charge good cash flow
• Tax rate 34
• Strong EPS growth
• Dividend up 5

after charging goodwill amortisation of 0.3m
(2003 0.3m)
15
Cash flow
m
Net capital expenditure -6m
Reduction in net debt 2m
Operating profit 23m
Interest, tax, dividends -20m
Exchange 1m
Working capital increase -4m
Other 1m
Depreciation 6m
16
Productivity
7
Sales
Employees
0
7
Sales/Employee
17
Key statistics

• 
  First Half First Half
• 2004 2003
• Net debt 12.6m 30.4m
• Net gearing 7 19
• Capital expenditure / depreciation 98 96
• Goodwill amortisation 0.3m 0.3m
• Operating cash flow 26.2m 20.6m

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International Accounting Standards

• Key areas for 2005 (and 2004 comparatives)
• Pensions Recognise deficit on balance sheet
  (30m at December 2003). Accounting similar to
  FRS 17. PL effect unpredictable probably not
  material.
• Share based payments PL charge for share
  option and share ownership schemes estimated
  additional cost ½m p.a.
• Goodwill Existing goodwill no longer amortised
  (subject to annual impairment test) PL effect
  approx 0.7m.
• RD Development expenditure capitalised. PL
  effect expected to be minimal.
• Minority Interests India Mexico

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Spirax Sarco

• Focused on growth and
• creating shareholder value

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Spirax Sarco Engineering

• 2004 Interim Results
• September 2004
• Questions

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Appendix - Currencies

• First half 2004 First half 2003 Year 2003
• Average exchange rates
• Bank of England sterling index 104.2 101.0 100.6
• US 1.82 1.61 1.64
• Euro 1.48 1.46 1.45
• Won 2,124 1,939 1,958
• Period end exchange rates
• Bank of England sterling index 104.8 100.4 100.6
• US 1.81 1.65 1.79
• Euro 1.49 1.44 1.42
• Won 2,096 1,971 2,133

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Appendix - Sources of growth

• Geographic expansion - new and increased
  penetration
• Market share - traditional and newer products
• Product additions and developments
• Focus on market segments where we are
  under-represented
• Increased sales coverage
• Increase in industrial activity
• Acquisitions