2005 Preliminary Results

1
Spirax-Sarco Engineering plc 2005 Preliminary
Results 31st December 2005
Steam specialties Controls instrumentation Heat
exchange solutions Steam system
services Peristaltic pumps
2
2005 Preliminary Results

• Mike Townsend - Chairman
• Marcus Steel - Chief Executive
• David Meredith - Director - Finance

3
Overview of 2005 Results

• 2005 2004 Change
• Revenue 349.1m 316.0m 10
• Operating profit 55.2m 48.0m 15
• Margin 15.8 15.2
• Pre-tax profit 57.0m 48.7m 17
• EPS 50.0p 43.1p 16
• DPS 23.8p 21.4p 11

• Good growth in Asia and Americas
• Operating profit up 15
• Improved operating margin of 15.8
• Strong cash flow
• Dividend for full year up 11

4
Segmental Analysis of Revenue
UK Republic of Ireland 11
North America 21
Rest of World 13
Continental Europe 36
Asia 19
Sales are by geographical location of the customer
5
Revenue Changes
Continental North UK Europe Asia America RO
W Exchange Total 0.2m 2.9m 7.7m 8.0m 6.
2m 8.1m 33.1m
m
/- YOY H1 H2 Year Organic Sales
7 5 6 Acquisitions 1 3 2 Exchange 1
4 2 9 12 10
Note Sales are based on the geographical
location of the customer. Segmental
splits are shown at constant exchange rates.
6
Operating Profit Changes
Continental North UK Europe Asia
America ROW Exchange Total 0.5m 0.3m 2.2m
1.6m 0.5m 2.1m 7.2m
m
/- YOY H1 H2 Year Operating profit 13 17 15
Operating margin 2005 15.0 16.5 15.8 Operatin
g margin 2004 14.4 15.9 15.2
Note Segmental splits are shown at
constant exchange rates.
7
UK Republic of Ireland
2005 2004 change change excl XR Sales to
customers 40.1m 39.9m 0 0 Sales by
operation 102.5m 97.4m 5 5 Operating
profit 10.9m 10.5m 3 5 Margin 10.6 10.
8

• UK domestic market remains weak
• Domestic sales flat
• Increased demand on factories from overseas
  markets
• Profit up 3 despite higher raw material and
  energy costs

Sales by operation comprise customer and
intra-group sales. Margin is Operating profit as
of sales by operation
8
De Mulder Sons, UK - Flash steam recovery cuts
energy costs by 20

• Rendering plant using 25 tonnes of steam per
  hour.
• Spirax recommended re-use of flash steam.
• Designed, supplied and commissioned recovery
  plant.
• Unit installed over a week-end.
• Boiler efficiency raised so one boiler taken off
  line.
• 20 energy saving in the process.
• The group has other plants needing similar
  treatment.

9
Continental Europe
2005 2004 change change excl XR Sales to
customers 125.3m 121.2m 3 2 Sales by
operation 156.1m 149.3m 4 3 Operating
profit 18.7m 17.8m 6 2 Margin 12.0
11.9

• Organic third party sales grew 2
• European markets mainly weak
• Exchange boosted sales by 8
• Profit includes factory closure net charge of 1¼
  million
• Good profit growth helped by France exchange

• European industrial markets patchy generally
  weak
• Sales up 3 - Growth in Scandinavia, Italy,
  Spain, Switzerland
• Lower sales in France, Czech and Portugal
• Profit up 6 due mainly to exchange benefit

Sales by operation comprise customer and
intra-group sales. Margin is Operating profit as
of sales by operation
10
Metsa-Botnia plant - Increased capacity and
better quality pulp in Finland

• Pulp drier was inefficient and limiting output.
• Spirax was asked to propose a solution.
• System surveyed redesigned.
• Spirax modified steam system for the heater
  batteries.
• Output now reliable and more flexible.
• Corrosion in system largely eliminated.
• Customer now able to sell surplus heat to local
  companies
• Reduced energy consumption reduced cost per ton
  of pulp.

11
Asia
2005 2004 change change excl XR Sales to
customers 65.8m 55.3m 19 13 Sales by
operation 61.3m 50.5m 21 15 Operating
profit 11.4m 8.2m
40 24 Margin 18.7 16.2

• Economies generally positive
• Organic sales up 13 - widely spread
• Strong growth in Korea, also Won much stronger
• Good performance in China, Taiwan and Thailand
• Profit up 24 at constant exchange and margin
  improved
• India (an Associate) good growth

Sales by operation comprise customer and
intra-group sales. Margin is Operating profit as
of sales by operation
12
Hyundai oil refinery, Korea - Compact steam
trapping solution provides ease of maintenance

• Steam tracing system.
• Excessively high maintenance costs, due to plant
  design.
• Spirax trap stations designed for quick
  maintenance.
• Spirax unit also easily isolated a problem with
  existing system.
• Spirax also provided training support.
• Tailored to customers requirements.

13
North America
2005 2004 change change excl XR Sales to
customers 73.1m 64.1m 14 12 Sales by
operation 73.2m 65.0m 13 11 Operating
profit 7.9m 6.6m 20 25 Margin 10.8
10.2

• Sales increased by 12 in constant currency
• Increased sales and profits in USA
• Good performance in Watson-Marlow Bredel
• Operating profit up 20
• Mexico (an Associate) also performed well

• Sales by operation comprise customer and
  intra-group sales.
• Margin is Operating profit as of sales by
  operation

14
Michelin GroupSpirax Sarco control valves
improve vacuum system at Michelin

• Brazilian plant in Campo Grande.
• Tyre presses slow to finish cooking process.
• Spirax audit identified poor control of vacuum
  system emptying presses.
• We supplied new control valves, actuators
  positioners.
• Cycle time cut by 20 - 25.

15
Rest of the World
2005 2004 change change excl XR Sales to
customers 44.8m 35.5m 26 16 Sales by
operation 45.9m 36.5m 26 15 Operating
profit 6.2m 4.9m 27 10 Margin 13.5
13.4

• Sales up 26 includes Mitech acquisition in
  South Africa
• Underlying operating profit up 10
• Exchange gains (mainly Real) boosted sales and
  profits
• Good performance in Argentina. Brazil flat.
• Margin flat South America Australia lower

Sales by operation comprise customer and
intra-group sales. Margin is Operating profit
as of sales by operation
16
Financial Aspects

• m 2005 2004 change
• Revenue 349.1 316.0 10
• Operating profit 55.2 48.0 15
• Margin 15.8 15.2
• Net finance income 0.9 0.0
• Associates 0.9 0.7
• Profit before tax 57.0 48.7 17
• Tax rate 33.0 33.4
• EPS 50.0p 43.1p 16
• DPS 23.8p 21.4p 11
• Improved finance income good cash flow
  pensions
• Tax rate 33
• Strong EPS growth

17
Cash Flow
Operating Net Capexp Shares Net cash
interest Taxation inc RD Dividends Acqns issues
Exchange cash 60.2m 0.2m -16.8m -13.1m -1
6.4m -5.9m 8.6m 0.9m 17.7m
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Key Statistics

• 2005 2004
• Operating profit margin 15.8 15.2
• Amortisation of acquisition intangibles 0.2m nil
  
• Sales per employee 4 7
• Return on capital employed 30.4 27.2
• Net cash 19.0m 1.3m
• Cash from operations 60.2m 62.2m
• Capital expend / depreciation 99 113
• Cash conversion 92 99
• Pension deficit (before tax) 45.8m 41.3m

• 2006 - 20m additional pension contributions
• - Share buy-in, up to 2m shares

19
Spirax Sarco

• Focused on growth and
• creating shareholder value

20
Spirax-Sarco Engineering 2005 Preliminary
Results 31st December 2005 Questions
Steam specialties Controls instrumentation Heat
exchange solutions Steam system
services Peristaltic pumps
21
Spirax Sarco
Pence per share
Key EPS DPS
35.3 38.5 43.1 50.0 38.0 38.3 34.5 36.1 37.
4 34.4
14.8 15.8 16.5 17.3 18.0 18.6 19.3
20.1 21.4 23.8
1996 1997 1998 1999 2000 2001 2002 2003 2004 200
5
Note 2004 and 2005 have been prepared under IFRS
22
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

23
Appendix - Currencies

• 2004 First Half 2005 Year 2005
• Average exchange rates
• Bank of England sterling index 103.8 102.4 101.0
• US 1.83 1.88 1.82
• Euro 1.47 1.46 1.46
• Won 2,092 1,911 1,866
• Period end exchange rates
• Bank of England sterling index 101.5 100.9 98.3
• US 1.92 1.79 1.72
• Euro 1.41 1.48 1.46
• Won 1,987 1,853 1,735

24
Appendix - Return on Capital Empld

• m 2005 2004
• Capital Employed
• Property, plant equipment 85.8 83.5
• Inventories 64.2 58.2
• Trade receivables 83.3 76.0
• Prepayments, other current assets 9.1 8.7
• Trade, other payables current
  tax (54.2) (50.2)
• 188.2 176.2
• Average Capital Employed 182.2 176.3
• Operating Profit
• As reported 55.2 48.0
• Amortisation of acquisition intangibles
  0.2 0.0
• 55.4 48.0
• ROCE 30.4 27.0

25
Appendix Cash Conversion

• m 2005 2004
• Cash generated from operation 60.2 62.2
• Net capital expenditure (property, plant
• equipment, software and RD) (13.0) (14.4)
• Additional pension cash contribution 4.0 0.0
• 51.2 47.8
• Operating Profit 55.2 48.0
• Amortisation of acquisition intangibles 0.2 0.0
• 55.4 48.0
• Cash conversion 92 99

26
Appendix IFRS effect on 2004

• Overall pre-tax profit reduced by 2.1m but EPS
  reduced by only 1
• Pensions Deficit recognised on the balance
  sheet. 28m at Dec 2004 - 41m less deferred
  tax asset 13m
• Pensions Reduced pre-tax profit by 0.7m
• Share-based payments PL charge of 0.4m for
  share options and share ownership scheme
• Goodwill Amortisation of 0.7m ceased
  (subject to annual impairment)
• RD Development expenditure capitalised and
  amortised. Net PL credit of 0.1m
• Associated companies in Mexico/India Now
  deconsolidated. Sales reduced by 9.8m.
  Pre-tax profit reduced by 1.8m but EPS not
  affected.