IN OUR WORLD‐LEADING NICHE BUSINESSES

0 Investor opportunities March 2019 Engineering Sustainable Growth

INVESTOR OPPORTUNITIES

IN OUR WORLD‐LEADING NICHE BUSINESSES


• Direct sales model key to delivering customer value

• Large diversity of customers, geographies, markets and products

• 85% of sales from maintenance and repair budgets (35% self‐generated)

• Sales presence in 62 countries; manufacturing in 14 countries

• Average revenue growth: 7% per annum (excluding 2017 acquisitions)

• Revenue growth tracks 2x Global Industrial Production growth rate

• Good operating profit margin: 23.0% (2018)

• Robust balance sheet; strong cash generation

• Return on capital employed 54.9% (2018)

• 51 year dividend progress; 11% CAGR

• Special dividends in 2010, 2012 and 2014

A British multi‐national engineering groupThree world‐leading niche engineering businesses

Global addressable market: £8.5bn; 14% market share


Group structureThree world‐leading niche businesses

Watson‐Marlow:niche peristaltic pumps and associated fluid path technologies

www.wmftg.com

Chromalox:electrical process

heating and temperature management solutions

www.chromalox.com

Steam Specialties: industrial and commercial

steam systems

www.spiraxsarco.com; www.gestra.com

£1,153m

64%

13%

23%

Steam Specialties

EMEA

Asia Pacific

Americas

Chromalox

Watson‐Marlow

2018 Group Revenue

Thermal Energy Management


Process heating and temperature management solutions (from July 2017)

Uses: electric heating for mission‐critical industrial processes, freeze protection for pipes, valves and tanks, and component heating

Benefits of electric solutions: easy to incorporate, install and maintain; high temperatures; controllable; no emissions at point of use

Products: Industrial Heaters & Systems; Heat Tracing; Component Technologies

Delivering: efficient thermal energy management and control solutions for improved industrial processes

Industrial and commercial steam systemsSteam uses: heating and curing, cleaning, sterilisation, hot water generation, space heating and humidification

Benefits of steam: high energy content, easy to control, environmentally safe, clean and sterile

Products: steam traps, control valves, condensate recovery pumps, strainers, separators, flow meters, boiler controls, pre‐fabricated engineered packages

Delivering: improved process efficiency and product quality; reduced CO₂ emissions, energy and water use, waste and maintenance downtime; compliance with industry standards

Thermal Energy Management


Plant‐wide applicationsBroad product range

Our product range includes: steam traps, pressure and temperature control valves, condensate

recovery pumps, strainers, separators, humidifiers, flow meters and boiler controls

Pre‐fabricated engineered packages for heat transfer & recovery and clean steam generation

Clean steam generator Heat exchange package

Flash steam heat recovery

We are a one‐stop shop for industrial and commercial steam systems


Steam and condensate loopApplications overview

Steam generation Steam distribution and utilisation Packaged Solutions & Energy Recovery

Feedwater supply, storage and conditioning

TDS controls

Boiler level controls

Boiler blowdown

Blowdown heat recovery

Bottom blowdown valves and vessels

Start‐up systems and separators

Condensate monitoring

Pressure control

Temperature control

Flow metering Steam traps Ancillaries

Wireless communication

Flash steam recovery

Condensate recovery

Humidification Heat transfer solutions

Clean & pure steam products


Plant‐wide applicationsBroad product range

Our product range includes: process heaters, air heaters, radiant heaters, tubular heaters, cartridge heaters, power and temperature

controls, temperature sensors, thermostats andheat trace cables and connection kits

Pre‐fabricated engineered packages for process heating and temperature management

We provide advanced thermal technologies engineered for the world’s toughest industrial heating applications

Process Heating Packages

Fuel Gas Conditioning System

Heat Transfer System


Chromalox expands our addressable market

* New Product Introduction

Thermal Energy Management: electricity and steam have complementary uses.

The choice between heating mediums is driven by application needs or customer circumstances


Peristaltic pumps

• Peristaltic principleRotor shoes/rollers squeeze tubing for gentle pumping action

• Contamination freeNo moving parts in contact with process fluid

• Virtually maintenance freeNo seals, check valves, diaphragms or rotors

• Highly accurateSophisticated pump head electronics ensure accuracy for dosing and metering applications

Watson‐Marlow pumps and systemsCost‐effective solutions for difficult applications

Watson‐MarlowBusiness built around unique pumping and niche fluid path

technologies


Watson‐Marlow pumps and systemsCost‐effective solutions for difficult applications

Hygienic applications: the pump does not touch the fluid Making peristaltic pumps perfect for clean fluids which must not be contaminated –Pharmaceutical & Biotechnology and Food & Beverage industry applications. A sterile tube makes a sterile pump.

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; a new hose makes a new pump.

Specialty filling systems (Flexicon)Small batch production of pharmaceuticals using peristaltic pump filling technology. Bench top models to fully automated filling and capping systems.

Lower whole‐life cost for niche applicationsHigher up‐front purchase cost more than offset by lower life cycle costs.

Single‐use fluid path technologiesSingle‐use fluid path components such as clamps, valves, connectors, sanitary gaskets and tubing, for Pharmaceutical & Biotechnology industries.


Low‐flow peristaltic metering pumps (acquired in 1990)

Precision pump and transfer tubing

High‐flow industrial hose pumps

(acquired 1996)

Low‐flow, high precision OEM pumps

(acquired 2000)Aseptic filling (acquired 2008)

PTFE‐lined flexible hoses (acquired 2016)

Watson‐Marlow Fluid Technology GroupTen brands offering customers an unrivalled breadth of pumping services

Sinusoidal pumps (acquired 2009)

Biotechnology tubing connection systems (acquired 2014)

High purity polymer products company(acquired 2015)

Stainless steel tank bottom and in‐line valves

for Biotechnology (acquired 2015)


Our direct sales business modelPositioning 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.

Customer closeness: Our direct sales business model creates a unique understanding of our customers’ needs and enables us to build deep, long‐term relationships as we help our customers solve their difficult productivity, control and energy efficiency problems, and improve their operational performance and sustainability.

Applied engineering: It is not our products alone that provide value to our customers ‐ it is the application of our extensive knowledge of systems design, operations and maintenance.

Wide product range: The breadth of our product offering is unmatched by our competitors and our one‐stop shop approach simplifies the procurement process for our customers who are increasingly seeking partnerships with competent full‐service suppliers.

Regional manufacturing: Local availability of a wide range of products is critical to our business model and enhances top line revenue growth. We have strategically located our manufacturing plants across the world, in Europe, North America, Latin America and Asia.


• 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 leading products, services and packages for one‐stop shop approach)

• local stocks (products available off‐the‐shelf worldwide)

• energy and water savings (help our end users to meet their sustainability objectives and save money)

• process improvements (provide increased operating efficiency and throughput, and lower operating costs)

• regulatory compliance (help reduce plant emissions and provide expertise and training to meet increasingly stringent standards)

We use our…

to deliver…

…to customers

Our business model in actionCreating value for customers


Customer capex vs opex spendSales by value driver*

Maintenance and repair sales that maintain existing systems, supported by the end users’ opex budgets, with a typical invoice value of around £1k

Small project sales that improve existing systems, supported by the end users’ opex budgets, with a typical invoice value of £10k‐£50k

Large project sales that build new systems, supported by the end users’ capex budgets, with a typical invoice value of over £100k

85% of Group revenue is generated from annual maintenance and operational budgets

* Based on Spirax Sarco internal estimates

Self‐generated salesOur sales and service engineers are highly skilled in both product applications and systems understanding. We self‐generate sales as we identify our customers’ unrecognised needs and solve their difficult process challenges.

50%

35%

15%


17%

3%

16%

14%7%7%

4%

4%

4%

3%3%

2%1%1% 14%

Group Sales2018

FoodBeveragePharmaceutical & BiotechnologyOEM machineryOil & GasChemicalHealthcarePower GenerationBuildingsMining & Precious Metal ProcessingWater & WastewaterPulp & PaperRubber & PlasticTextileOther

50% of Group revenue derived from defensive, less cyclical, end markets

85% of Group revenue derived from annual maintenance and operating budgets, rather than large projects from capex budgets

Based on Spirax Sarco internal estimates

Diverse markets and broad customer base

Where there is little visibility of end user industry sector (primarily in sales via distributors), sales have been allocated across industries on a pro‐rata basis. In 2018 these “unknown” sales accounted for 22% of total revenue. OEM sales to identifiable industries have been allocated to those industries. Sales to OEM customers accounted for 20% of Group revenue in 2018.

A source of resilience


FoodSteam is used for

blanching, cooking, baking, packaging, cleaning and

sterilising. Electric heating elements are used in commercial food

equipment. Pumps are used to meter ingredients, deliver food to process lines and handle process

waste.

BeverageSteam is essential for brewing and distilling processes. It is used to protect product quality and flavour, and ensure compliance with industry standards. Pumps are used to transfer fruit,

juice, concentrates, yeast and other additives.

Buildings (HVAC)Steam is used to provide

space heating, humidification and hot water in public and

private buildings, while our electrical products are used for hot water and heat generation,

snow melting, gutter and roof de‐icing, and frost‐

heave prevention.

OEM MachineryOriginal Equipment

Manufacturers (OEMs) are companies that build and supply machines for use in industry. Our

activities with OEMs vary from simple product supply to advising on machine performance improvements and process plant design.

Oil & GasElectrical heating products increase fluid viscosity, deliver freeze protection and help separate natural gas, crude oil and water during extraction. Our steam products enable optimum steam system performance and reduce energy use during oil and

gas production.

Pharmaceutical & Biotechnology

Clean steam reduces the risk of product and process contamination; electrical heating is used in a wide range of process heating

applications; our peristaltic pumps, valves and single‐use components enable precise flow control and

fluid isolation.

HealthcareSteam is used in hospitals

and clinics for space heating, hot water

production, humidification and sterilisation. Pumps and associated equipment

are used in the manufacture of products

for the Healthcare industry.

Mining & Precious Metal Processing

Peristaltic pumps reduce water, energy and chemical

use and increase productivity while moving and processing abrasive

ores and slurries. Electrical heating is used for

temperature maintenance and space heating for

workers.

ChemicalSteam and electricity are widely used as an energy

source in chemical production and product processing, while our

pumps are used to safely and accurately transfer

and dose critical chemical components.

Water & WastewaterPeristaltic pumps are used to dose chemicals during

water treatment processes and to transfer

viscous and abrasive slurries. Electric heating solutions provide freeze protection, temperature maintenance and space

heating in water treatment plants.

Power GenerationElectrical heat technologies are widely used to optimise power generation. Steam turbines transfer chemical energy in fuel into electrical energy and steam is used to distribute and re‐use waste

heat formed during the power generation process.

Pulp & PaperOur steam, electric and pump products facilitate the accurate control of

critical processes, such as washing, bleaching, dyeing, drying and finishing, in the manufacture of paper and a wide range of domestic and industrial tissues.

Our diverse market sectors


Our unique global coverage and expansionOver 7,500 employees across 62 countries; 122 operating units* Operating units are business units that invoice locally

Sanctions: We do not supply products subject to sanctions or supply to proscribed persons. We comply with all sanctions and export regulations, including dual purpose regulations.

40 new operating units established or acquired in the 3 years to March 2019.

Steam Specialties:

SxS: Brazil (Hiter), East Africa, Hungary, Romania and Maghreb

Gestra: Germany, Italy, Poland, Portugal, Spain, Singapore, UK and USA

Chromalox: Brazil, Canada (x2), China (x2), Developing Markets (Americas, Asia Pacific, EMEA), France, Germany, Hong Kong, India, Mexico, Singapore, Thailand, UAE, UK, USA (x3)

Watson‐Marlow: Canada, Ireland, Indonesia, Thailand, Vietnam, UAE, UK (Aflex)

Operating units* (47 countries)

Sales offices (+15 countries)

Distributors (+53 countries) Serving customers in 115 countries


EMEA:UK (SxS, WM, BioPure and Aflex) ItalyFrance (SxS and Chromalox)Germany (Gestra and MasoSine)Netherlands (Bredel)Denmark (Flexicon)Sweden (Alitea)

Americas:USA (SxS, Chromalox, Asepco

and FlowSmart)ArgentinaBrazilMexico (SxS and Chromalox)

Asia Pacific:China (SxS, Chromalox and WM)IndiaJapan (MasoSine)

Regional manufacturing strategyLocal product availability

Steam Specialties manufacturing siteChromalox manufacturing siteWatson‐Marlow manufacturing site


Group geographic revenues, 2018Good regional coverage

Emerging markets: 34% of sales and 39% of operating profit

Americas 34% Emerging markets 7%

EMEA 42% Emerging markets 6%

Asia Pacific 24%Emerging markets 21%


£8.5 billion market size14% market share

Source: based on Spirax Sarco internal estimates

2018total addressable

market size

£8.5bn

Steam Specialties market

Steam Specialties market share 16%

Watson‐Marlowmarket share 19%

Niche pumps and associated equipment market

Electrical thermal energy management

market

Chromalox market share 6% £4.6bn

£2.4bn

£1.4bn


Operate sustainably and help improve our customers’ sustainability

• To be the world leader in steam and thermal energy solutions

• Intensify customer focus through enhanced customer value propositions

• Focus on priority industries• Competitive advantage through enhanced knowledge and skills

• Increase R&D effectiveness• Global excellence in the supply chain

• Enhance market sector sales focus

• Achieve rapid geographical expansion

• Accelerate development of breakthrough products

• Attain excellence in manufacturing

• Selective product and market sector diversification

• Create environments where people thrive

• Create significant shareholder value through supplementing organic growth

• Expand the capabilities of our niche businesses through new technologies, skills or geographic coverage

• Increase our addressable market into adjacent related sectors

Watson‐Marlow AcquisitionsSpirax Sarco

Objective: self‐generated growth that outperforms our markets

Focus: doing better what we already do well

Our strategy

Sustainability


• Expand sector focus of the direct sales force

• Enhance customer value propositions by sector

• Increase focus on thermal energy management within priority sectors

• Continually improve technical competency, skills and process knowledge

• Expand and globalise wide‐range of training tools and materials

• Develop unrivalled level of expertise

2. Develop the knowledge and skills of our expert sales and service teams

3. Broaden our global presence

1. Increase direct sales effectiveness through market sector focus

• Maximise first‐to‐market advantage from early entry into emerging markets

• Leverage existing infrastructure to pioneer the introduction of Watson‐Marlow

Six strategic themes


• Leverage R&D to accelerate growth

• Shorter time‐to‐market for new products

• Develop products for priority sectors

• Complementary acquisitions to expand addressable markets

• Invest in regionalised manufacturing strategy

• Increase focus on extended supply chain

• Enhance product availability, increase flexibility, improve service levels and reduce costs

• Increase our sustainability

• Focus on corporate governance, employee wellbeing, community engagement and environmental stewardship

• Provide solutions to help customers meet their sustainability targets

Six strategic themes

4. Leverage R&D investments

5. Optimise supply chain effectiveness

6. Operate sustainably and help improve our customers’ sustainability


• Market leading provider of electrical solutions for industrial process heating & temperature management

• Consideration: US$415m

• 9.7x trailing EBITDA 2016

• 2016 performance: revenue US$201m; EBITDA US$43m; EBIT US$37m

• Expands Group addressable market by £2.4 bn

• Leader in advanced industrial boiler control systems; designs and produces valves and controls for steam and fluid process control

• Consideration: €186m


• 2016 performance: revenue €92.5m; EBITDA €16.6m; EBIT €15.2m

• Increases Steam Specialties technology and market share

Recent acquisitionsHighly complementary to the Steam Specialties business

• Leading designer and manufacturer of highly engineered electrical thermal solutions

• Consideration: €158m


• 2018 performance: revenue €49.8m; EBITDA €12.9m; EBIT €12.1m

• Extends our electrical process heating capabilities


Drivers of strong growth

‐ Biopharm industry growing at c.10% per annum

‐ Geographical expansion

‐ Displacement of other pump types

External‐ Industrial production growth‐ Population growth‐ Energy and natural resource saving targets

‐ Rising regulatory requirements

Internal‐ Geographic expansion‐ New product development‐ Business strategy‐ Regional manufacturing strategy

Organic growth drivers:

Watson‐Marlow growth drivers:

Inorganic growth drivers:

Bolt‐on or related acquisitions‐ New technologies‐ Increased geographic coverage‐ Expansion of addressable market


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Strong history of sales growthGood operating profit margin expansion

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Sales £ millions

SalesSales from 2017 acquisitionsReported profit margin Margin excluding 2017 acquisitions

Underlying margin increased from 17.1% to 25.2%

25 year average

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Underlying 7% revenue growth(excluding 2017 acquisitions)


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EPSDPS

Delivering shareholder valueEPS and DPS growth; 51 year dividend progress

Dividend CAGR: 12% over 10 years, 10% over 35 years and 11% over 51 years

* Plus special dividends of 25p in 2010, 100p in 2012 and 120p in 2014

Note: Figures exclude non‐operating and exceptional items

p/share

Our prime financial objective is to provide enhanced value to shareholders through consistent growth in earnings and dividends per share.

* **


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Strong cash generation

Capital allocation priorities: 1) Invest in our businesses 2) Acquisitions 3) Reduce debt 4) Return cash to shareholders

Cash conversion measures the percentage of adjusted cash from operations to adjusted operating profit


Appendices

Spirax‐Sarco Engineering plc headquarters, Charlton House, Cheltenham, UK


Financial performance

• Organic sales up 7%; growth in all segments of Steam Specialties and Watson‐Marlow

• Good contribution from Gestra and Chromalox

• Operating profit up 12% organically

• EPS +13%; organic growth andacquisitions,partially offset by exchange

Strong organic growth, plus full‐year contribution from acquisitions

⁺ Organic measures are at constant currency and exclude contribu ons from acquisi ons and disposals.* Adjusted profit measures exclude certain items.

2018 2017 Reported Organic⁺

Revenue £1,153.3m £998.7m +15% +7%

Operating profit* £264.9m £235.5m +12% +12%

Operating profit margin* 23.0% 23.6% ‐60 bps +120 bps

Net finance expense (£10.3m) (£6.4m)

Pre‐tax profit* £254.6m £229.1m +11%

Tax rate* 27.6% 29.1% ‐150 bps

EPS* 250.0p 220.5p +13%

DPS 100.0p 87.5p +14%


Our purpose: reducing environmental impactsIncreasing fuel efficiency, Kenya

12%reduction in firewood use

The issue: during steam heated air drying of tea leaves, firewood used to generate steam; environmental impacts from overuse of firewood

The solution: engineered solution to modulate steam flow to the drying bed, including six control valve stations

The result: increased fuel efficiency, firewood use reduced by 12% per annum, reduced environmental impacts, 17 month payback


Our purpose: delivering energy savingsPaper manufacturing lime dosing application, Netherlands

3%reduction in energy

use

The issue: bacteria in process water reduces efficiency of water removal during paper production, pulp typically enters drying ovens with 40% fibre to 60% water

The solution: accurate lime dosing using Qdos pumps; preventing bacteria growth

The result: water content of pulp reduced, enabling drying oven temperature to be reduced by 15°C, generating 3% per annum energy savings, reducing carbon emissions by 18,000 kg


Our purpose: providing safer working environmentsSafely warming caustic chemicals, USA

Safeheating of flammable

chemicals

The issue: unsafe warming of process lines, transportation pipes and holding tanks during chlorine production; high risk of fire

The solution: an audit by Chromalox engineers identified risk areas; bespoke solution included improved insulation, correct termination points and IntelliTRACE heat tracing line‐sensing control panel

The result: safe heating of flammable chemicals, significantly reduced risk of fire


EMEA Asia Pacific Americas

Steam SpecialtiesArmstrong International (USA) Private

ARI Armaturen (Germany) Private

TLV (Japan) Private

Forbes Marshall (India) Private

Spence/Nicholson (USA) Circor: NYSE

Other product specialists: Samson (Germany) Private; Fisher Controls (USA) Emerson: NYSE; Valtek (USA) Flowserve: NYSE; Krohne (Germany) Private; Endress & Hauser (Swiss) Private

Watson‐MarlowVerder (Netherlands) Private

Cole Parmer (USA) Thermo Fisher: NYSE

Other pump types and fluid path components: Moyno (USA) Dover: NYSE; Wilden (USA) Robbins & Myers: NYSE; Waukesha (USA) SPX: NYSE; Mono (USA) National Oilwell Varco: NYSE; Warren Rupp/Pulsafeeder (USA) IDEX: NYSE; Prominent (Germany) Private; Saint‐Gobain Bioprocess Solutions (France) Saint‐Gobain: Euronext Paris

Group competitors

‐ strong presence in the region ‐ medium presence in the region


EMEA Asia Pacific Americas

ChromaloxWatlow Electric Manufacturing Company (USA) Private

BARTEC (Germany) Private Equity

Vulcanic, (France) Private Equity

EXHEAT Limited (UK) Private

nVent (USA) Public: NYSE

Thermon Group Holdings Inc (USA) Public: NYSE

O’Brien (USA) Ametek: NYSE

Other product specialists: Minco Products Inc (USA) Private; Armstrong International (USA) Private; KLÖPPER‐THERM GmbH & Co. KG (Germany) Private; CSI (Controls South East Inc) (USA) Ametek: NYSE; HEAT TRACE (UK) Private

Group competitors

‐ strong presence in the region ‐ medium presence in the region

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IN OUR WORLD‐LEADING NICHE BUSINESSES