Spirax Group Plc. · LSE:SPX
Spirax — Investor Day (October 2024)
94 slides from Spirax's investor day presentation, October 2024
Slide 1: Evolving for tomorrow's world
Evolving for tomorrow’s world. October 2024
Slide 2: Evolving for tomorrow's world
Evolving for tomorrow’s world. October 2024 Nimesh Patel Group Chief Executive Officer
Slide 3: Joining me today
Joining me today… 3 Louisa Burdett Maurizio Preziosa Andrew Mines Chris Molnar Maria Wilson Group Chief Managing Director Managing Director VP Process Industries Group Digital Director Financial Officer Steam Thermal Electric Thermal Electric Thermal Solutions Solutions Solutions Phil Scott Martin J
Slide 4: Welcome and Agenda
Welcome and Agenda 4 AGENDA Introducing Spirax Group leadership team 1.30pm 1 Introduction and overview Nimesh Patel 2 Electric Thermal Solutions Andrew Mines 3 Electrification Chris Molnar Purpose of today’s Capital Markets presentation 4 Steam Thermal Solutions Maurizio Preziosa 3.15pm Break (30 m
Slide 5: Together for growth
Together for growth. Nimesh Patel Group Chief Executive Officer
Slide 6: A differentiated Group with strong and enduring traits
A differentiated Group with strong and enduring traits 6 Direct sales model focused on solution selling… …funded from Opex budgets… Customer Maintenance and closeness Responsive manufac- Applied engineering 2,100 Replacement Typical invoice: £1.5k 100k+ turing Understanding Small project local custo
Slide 7: Three high-quality, high-margin, long-term growth engines
Three high-quality, high-margin, long-term growth engines 7 Accelerating our Group’s compounding growth and margin will enhance our long track record of strong EPS growth Steam Thermal Solutions Electric Thermal Solutions Watson-Marlow • Proven capability to outperform IP • Clear plan to substantial
Slide 8: Positioned to benefit from global mega-trends
Positioned to benefit from global mega-trends 8 Resource Ageing Increasing demand for Changing efficiency populations consumer goods lifestyles Industrial thermal energy Over 65s increasing to Emerging middle class Sustainability, health and ~ 20% of global CO2 emissions ~ 1.5 billion people ~ addit
Slide 9: Expanding our annual addressable market
Expanding our annual addressable market 9 Decarbonisation of thermal energy expands addressable market by 60% to £17.3bn Future expansion £4.2 bn of addressable market: £17.3bn Decarbonisation of thermal • IP-related growth energy beyond steam • Pricing generation: • Biopharm and Semicon £13.1bn • C
Slide 10: We are evolving to meet customers' future needs
We are evolving to meet customers’ future needs 10 Strengthening our competitive differentiation and value proposition Customer Partnership Customer Solutions Connected customers Customer Best Product closeness Seamless Applied service design and delivery Anticipating engineering Responsive Applied
Slide 11: Strategy in action: Decarbonising Thermal Energy
Strategy in action: Decarbonising Thermal Energy.
Slide 12: Uniquely positioned with electric and steam expertise
Uniquely positioned with electric and steam expertise to 12 help customers deliver on their net zero requirements… ETS proven capability critical to decarbonisation solutions Temperature ~10% 1000°C ~20% 700°C ELECTRIC DIRECT ~45% ~25% 350°C STEAM Steam generated from fossil fuels (electrification p
Slide 13: Delivered through our Customer Partnership approach
…delivered through 13 our Customer Partnership approach
Slide 14: Supported by investment to build on our proven capabilities
…supported by investment to build on our proven capabilities 14 We are investing in the skills and capacity required to deliver our decarbonisation solutions Strategic Account Thermal Energy Applied and Bespoke Management Assessment Design Engineering Manufacturing And we are investing in developing
Slide 15: Focus and delivery
Focus and delivery.
Slide 16: Group priorities and investments
Group priorities and investments 16 ETS margin: 20% Organisational Digital Decarbonisation Fitness Increase plant throughput Simplify organisational Establish connections, Develop technologies structure data-driven insight Improve pricing Augment existing Optimise manufacturing Develop services capa
Slide 17: Simplifying our organisation
Simplifying our organisation 17 Over 130 sales companies and 37 manufacturing sites of varying scale 4 4 7 2 Spirax Group manufacturing location
Slide 18: Medium-term: sustaining our track record of growth
Medium-term: sustaining our track record of growth 18 High-single digit operating profit growth delivered through mid-single digit sales growth and margin improving to 22% ‒ 23% Steam Thermal Solutions Electric Thermal Solutions Watson-Marlow • Continue to outperform IP growth • Growth linked to IP,
Slide 19: Accelerating compounding growth and margin will enhance EPS growth
Accelerating compounding growth and margin will 19 enhance long track record of strong EPS growth Proven track record of organic growth at industry leading margins 1. …with three strong growth engines Significant runway for multi-decade growth underpinned by decarbonisation 2. …building on our uniqu
Slide 20: Delivering shareholder value
Delivering shareholder value 20 EPS CAGR of 9% over 10 years and 35 years * Special dividends of 25p in 2010, 100p in 2012 and 120p in 2014 Note: Figures exclude non-operating and exceptional items
Slide 21: Evolving Electric Thermal Solutions
Evolving Electric Thermal Solutions. Andrew Mines Managing Director ETS
Slide 22: A high-quality growth engine
A high-quality growth engine 22 Market leading expertise High and growing demand Complementary to STS High growth with 20%+ margin Uniquely positioned to take advantage of high growth emerging sectors, Track record in solving customer supported by strong expertise in problems within critical applica
Slide 23: With leading positions in attractive end markets
With leading positions in attractive end markets 23 Strategic end markets Energy Advanced Health and Materials Transition Technology Nutrition Industrial Process Heating ~75% of ETS sales 13% 7% Power Gen including Building & Construction Renewables 11% 3% 8% Oil & Gas Processing Engineered Chemical
Slide 24: Going through a positive evolution
Going through a positive evolution 24 With significant growth potential Pricing for the Leveraging existing Exciting growth Fixing Ogden and value we deliver capabilities opportunities operational footprint to customers Enhancing our Unique know how to solve Bringing the team together Semicon recove
Slide 25: Clear priorities and investment areas
Clear priorities and investment areas 25 ETS margin: 20% Organisational Digital Decarbonisation Fitness Increase plant throughput New Ogden expansion Establish connections, Development of Medium on stream in 2025 for data-driven insight Voltage technologies in Value selling Medium Voltage solutions
Slide 26: ETS margin: Manufacturing improvement at Ogden
ETS margin: Manufacturing improvement at Ogden 26 We understand the problem… Too much Insufficient control of quote, resulting in overly complex Production Production stability challenges bespoke design engineering projects that were difficult to planning configuration manufacture efficiently challe
Slide 27: ETS margin: we are making clear progress
ETS margin: we are making clear progress 27 Double-digit % 11 MV solutions 30% increase in increase in shipped in H1 Reduction in LV production Ogden sales in 2024 overdue backlog y-on-y first eight (H1 2023: 2) months
Slide 28: Our differentiated position in Industrial Equipment Heating
Our differentiated position in Industrial Equipment Heating.
Slide 29: Industrial Equipment Heating
Industrial Equipment Heating 29
Slide 30: Semicon industry: where we focus
Semicon industry: where we focus 30 Semicon manufacturing process Ion • Durex Industries and Thermocoax implantation solutions are present in the key Stripping manufacturing process steps • Durex Industries and Thermocoax capabilities, technologies and expertise are highly complementary Etching Depo
Slide 31: Nuclear industry: where we focus
Nuclear industry: where we focus 31 High precision thermocouples Heating systems within the for critical inCore reactor nuclear reactor pressuriser application Neutron and gamma flux Transmission cabling for high measurement InCore radiation and high temperature instrumentation environments
Slide 32: Aviation industry: where we focus
Aviation industry: where we focus 32 Temperature measurement Temperature measurement Anti-icing systems Combustion Chamber Optimisation systems Engines Brake systems Anti-icing assembly thermocouples and onboard engine monitoring sensors
Slide 33: Equipment heating competitive landscape
Equipment heating competitive landscape 33 Semicon Nuclear Aviation Aerospace Defence Our competitive advantage: • Consultative sales approach and in-depth knowledge of customer processes • Strong R&D and New Product Development expertise • Proprietary high temperature cable design • Vertically inte
Slide 34: Capturing opportunity in Industrial Process Heating
Capturing opportunity in Industrial Process Heating. Chris Molnar Managing Director, Vulcanic and VP Process Heating, ETS
Slide 35: Industrial Process Heating
Industrial Process Heating 35 Product groups 2023 Sales by product group Industrial Heaters & Systems Component Technologies Heat Trace Complex process Discrete heating and Thermal management heating solutions for sensing solutions solution for piping, mission critical industrial enable optimal valv
Slide 36: Electric resistance heating explained
Electric resistance heating explained 36 Electric resistance heating element design that can be vertically integrated into complex systems ETS core element design is used to build bespoke Low Voltage (LV) and Medium Voltage (MV) heaters Simple Core Design Featuring Four Main Components: 1 Resistor (
Slide 37: Advantages of MV compared to LV
Advantages of MV compared to LV 37 Medium Voltage opens access to a significant market opportunity • Efficiently delivers 5-10X more heating into processes • Installation costs reduced by up to 70% • Substantial long-term operational savings Traditional Low Voltage installation Equivalent Medium Vol
Slide 38: Uniquely positioned through technology: our Medium Voltage advantage
Uniquely positioned through technology 38 Industrial Process Heating Our Medium Voltage advantage 1. Patented Designs for control and safety 2. Unmatched performance – ETS is the only company with… • Third-party certifications Global Competitors • Successful 20,000V+ dielectric strength tests • Indi
Slide 39: Examples of economic and carbon impacts of MV
Examples of economic and carbon impacts of MV 39 2.5MW process heater for major chemical company Medium Voltage achieves: 70% +3% of CAPEX savings Operational energy efficiency +£290k +£4m Upfront installation savings Saving over the life of the system 18% 2,324 tonnes Process energy efficiency of c
Slide 40: Decarbonising European infrastructure
Decarbonising European infrastructure 40 Customer: Why it matters: Major European drywall • Enables customer’s carbon-free production vision gypsum board manufacturer • Leverages our expertise to: Problem: ⎻Model carbon offset forecasts Eliminate natural gas/LPG ⎻Prove reliability in novel electric
Slide 41: Delivering on the electrification opportunity
Delivering on the electrification opportunity 41 Current and next generation technologies to serve sector specific needs <120°C 1000°C Food & Beverage Building & Const. O&G Processing Gypsum & Board Energy Storage Petrochemical Metal Processing • Decentralised • District Heating • LNG defrost gas •
Slide 42: Current development of future innovation
Current development of future innovation 42 Higher temperatures Higher voltages Larger capacities Sector-focused R&D • > 700° C • > 7,200V • > 50MW Systems • Develop more efficient and higher performing • New applications • New geographic • Much more cost- systems through real- and sectors markets e
Slide 43: Partnering to deliver net zero: tangible value creation
Partnering to deliver net zero: tangible value creation 43 Scope 1 - Carbon Produced Energy Expended Existing Fired Solution 9,211 Existing Fired Solution 50,990 Our Electric Solution 0 Our Electric Solution 41,302 Target Zero Powering Zero Equipment Steam Systems Process Heating Heat Trace Output C
Slide 44: Electrification market opportunity methodology
Electrification market opportunity methodology 44 ~10% ~20% 8,760 hours/year Installed Multi-decade cost Annual capacity straight line per GW of to be conversion conversion electrification Industrial Equipment electrified rate rate utilisation Thermal Energy Use ~45% ~25% Annual market opportunity £
Slide 45: ETS ready to deliver growth and returns
ETS ready to deliver growth and returns. Andrew Mines Managing Director ETS
Slide 46: Growth and margin outlook
Growth and margin outlook 46 Growth Margin Long-term Above mid-single digit 20.0% target Organic growth >2x IP Continuing strong demand, Fixing Ogden Margin > 20.0% including for decarbonisation solutions Improved pricing Improved pricing Semicon recovery Semicon recovery Operational efficiencies On
Slide 47: The staying power of Steam Thermal Solutions
The staying power of Steam Thermal Solutions. Maurizio Preziosa Managing Director STS
Slide 48: A business model with enduring power
A business model with enduring power 48 Self-generated Steady MRO demand Decarbonisation Growth > 2 x IP solutions Focus on core industries with critical Dual-brand strategy and wide product manufacturing processes and a range to offer end-to-end solutions 6 1 sectorised sales force Steam Value base
Slide 49: Drivers of historical performance
Drivers of historical performance 49 Historical growth drivers Historical Margin Drivers 2013 - 2020 2021 - 2023 Margin 21-23% Margin 23-25% Steady MRO + self-generated solutions Growing share of China in overall STS mix High growth and operational Operational gearing gearing (esp. 2021-2022) Lag in
Slide 50: Drivers of growth in an evolving environment
Drivers of growth in an evolving environment 50 Increasing Reducing • Supporting our customers’ Decarbonisation sustainability journeys • Continuing to normalise • ‘Walk the plant’ AND Inflation Digital to ~2.0-2.5% ‘walk the data’ • Shift from capacity Commercial • Driving margin China Share of exp
Slide 51: Spotlight on decarbonisation
Spotlight on decarbonisation 51 A Decarbonisation Optimising thermal energy usage Digital B Decarbonising steam generation Commercial & Operational Excellence C Leveraging our footprint Leveraging our Group capabilities
Slide 52: Optimising customer's thermal energy usage
Optimising customer’s Customer objectives: 52 thermal energy usage Reduce CO2 intensity: 20% Reduce energy intensity: 10% Saputo Dairy Plant in California Reduce water intensity:10% Our approach: Walked the plant Advised on best solution Agreed optimisation roadmap Consultative Walk-the-plant soluti
Slide 53: Decarbonising steam generation
Decarbonising steam generation 53 Process heating technology landscape Very high temperature Low temperature DIRECT DIRECT OTHER STEAM HOT WATER FOSSIL FUEL ELECTRICITY FLUIDS ETS Decarbonising Steam addressable steam generation market LTHP Resistance Electrode HTHP Green Electricity HTHP Inductance
Slide 54: Target Zero
Target Zero 54 Our distinctive solutions to decarbonise Steam generation
Slide 55: Target Zero market sizing
Target Zero market sizing 55 Significant addressable market Boiler Demand x Target Zero Adoption Rate Customer Thermal Energy Decarbonisation Demand Commitments = Steam TAM: Customer Volume Price Share £2.4bn Economics Incl. HTHP Replacement Solution Rate Availability
Slide 56: Leveraging our Group
Leveraging our Group 56 A unique value proposition Breadth of Delivered through an evolving Group operating model capability Depth of Informed by our individual Business capabilities expertise
Slide 57: Leveraging our Group
Leveraging our Group 57 Evolving operating model supported by specialist business capabilities Strategic Account Management Operating Model Thermal Energy Assessment Boiler Existing Future Business Optimised solutions Heat pumps Thermal Energy Low Voltage Medium Medium NPD (high and Partnership use
Slide 58: Digital
Digital 58 A Decarbonisation Generating insights to support our customers Digital B Generating product pull-through Commercial & Operational Excellence C Leveraging our Enabling sales force footprint efficiency and effectiveness
Slide 59: Margin improvement to fund re-investment
Margin improvement to fund re-investment 59 A Decarbonisation Sales force efficiency and effectiveness Digital B Supply chain profitability Commercial & Operational Excellence C Leveraging our footprint Organisational complexity
Slide 60: Clear priorities and investment areas
Clear priorities and investment areas 60 Decarbonisation Drive sales growth Reposition China Supply chain Organisational technologies Fitness • Target Zero • Sales excellence • Org repositioning • Operational • Focus on sales excellence growth • High temp heat • MRO and self-gen • MRO and self-gen p
Slide 61: Driving growth and strong margins
…driving growth and strong margins 61 Growth Margin Long-term Low-to-mid-single digit 23.5% over medium term >2x IP growth Lower Inflation ~2.0-2.5% Drive value from manufacturing 23.5%+ margin Reduced impact of China on growth Reduce structural complexity Commercial and operational excellence Re-in
Slide 62: Break
Break Back at 15:45
Slide 63: Watson-Marlow: poised for growth
Watson-Marlow: poised for growth. Andrew Mines Managing Director, ETS (formerly MD, Watson-Marlow)
Slide 64: A strong and enduring growth engine
A strong and enduring growth engine 64 Recovery post Underlying Biopharm Process Industries growth High-single digit growth Biopharm destocking growth ~10% (2x IP) and >30% margin Direct sales model: ~300 sales Global leader with wide range of sector engineers bringing deep sector, process and appli
Slide 65: Underpinned by Biopharm (~50% of sales)
Underpinned by Biopharm (~50% of sales) 65 Fluid path Focused on high Market continues Uniquely Trend in Diversified process growth sub to move toward innovative Biopharm customer base expertise sectors single-use fluid demand supports >4,000 end user path and a “U” shape customers Underlying market
Slide 66: Customer partnership in action
Customer partnership in action 66 AI-enabled pumps Connected customers Seamless Applied service design and delivery Anticipating engineering customer needs Deep Optimising customer customers’ insight systems
Slide 67: And process industries (~50% of sales)
And process industries (~50% of sales) 67 Sectorised direct Wide range of Highly fragmented Innovation driving Emerging and high sales model drives applications for competition, without expansion in growth markets: our market highly specialised comparable sector addressable • Electric Vehicle penetr
Slide 68: Clear priorities and investment areas
Clear priorities and investment areas 68 Customer value Digital Manufacturing • Commercial Excellence • Machine learning • Operational Excellence – implementing Group framework best practice • Digitally enabled Pumps • Leveraging recent • Value selling capacity expansion for growth • Strategic procu
Slide 69: Returning to >30% margins
Returning to >30% margins 69 Growth Margin Long-term High-single digit growth >30% High-single digit growth Drop-through on organic Recovery in Biopharm Improving margin growth Incremental cost from recent Process Industries at 2x IP capacity expansion
Slide 70: Delivering our Digital future
Delivering our Digital future. Maria Wilson Group Digital Director
Slide 71: Connecting Spirax Group through digital
Connecting Spirax Group through digital… 71 Customer relationship Our products Direct sales Our operations
Slide 72: On our journey to customer partnership
On our journey to customer partnership 72 Connected customers Seamless Applied service design and delivery Anticipating engineering customer needs Deep Optimising customer customers’ insight systems
Slide 73: Digital Pathway
Digital Pathway 73 Enhanced Customer Experience, Tailored solutions with expert supporting end-to-end customer support that addresses a broader needs, through enhanced services set of our customers’ needs and solutions (e.g. Thermal energy management) Now Phase 2 Phase 3 Phase 4 2027 Enable customer
Slide 74: Digital is pivotal to Customer Partnership
Digital is pivotal to Customer Partnership 74 Technologies we How we How we How our Digital Pathway aligns are developing deliver value measure success with our Group Strategy Connected Orders Products value Insight Driving Organic Growth Data Pull-through Enablement Platform Customer Satisfaction S
Slide 75: Multiple revenue opportunities across the product lifecycle from services
Multiple revenue opportunities across the product 75 lifecycle from services Consultative sell End of life management Manufacture Use Maintain/repair Optimise
Slide 76: Evolving towards Customer Partnership: EasiHeat
Evolving towards Customer Partnership 76 Steam Thermal Solutions EasiHeat Expanding the value for our customers: • 1500 units pa (25,000 installed based) • 24/7 monitoring from commissioning • Access to digital dashboards and remote technical support • Optimisation insights • Annual minor and major
Slide 77: Efficient, safer and sustainable
Efficient, safer and sustainable 77 Delivering Efficient, Safer and Sustainable solutions Process Energy Reducing critical consumption cost solutions optimisation With our digitally-enabled services approach
Slide 78: Evolving towards customer partnership: Watson-Marlow pumps
Evolving towards customer partnership 78 Watson-Marlow pumps Expanding the value for our customers: • Extend component life • Increase uptime • Service includes maintenance, repairs and disposal of the consumable components Insight Service
Slide 79: Augmenting direct sales with generative AI
Augmenting direct sales with generative AI 79 Adding sales capacity without adding cost Proprietary Large Language Spirax Group specialised Model (LLM) that turbo Microsoft AI application knowledge charges direct sales capability Enablement
Slide 80: Investing in Digital as a growth driver
Investing in Digital as a growth driver… 80 …to enable organic growth Organic growth Pull-through Services revenues Unified approach to Focus on competitive Accelerate time-to-value technology and differentiation Enhance our core capabilities architecture Partnership ecosystem with Focus on optimisi
Slide 81: Delivering our financial ambitions
Delivering our financial ambitions. Louisa Burdett Group Chief Financial Officer
Slide 82: Sustaining our track record of organic sales growth
Sustaining our track record of organic sales growth 82 2009-2023 CAGR: reported growth ~8% and organic growth ~5% 10 Years 5 Years 4.3% 1.8x 6.1% 3.4x Average org growth Multiple of IP Average org growth Multiple of IP 15.0% 10.0% 5.0% 2009 2020 2023 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2
Slide 83: Mid-single digit revenue growth over the medium term
With mid-single digit revenue growth over the medium term 83 Delivered through a different mix ETS ~ Above mid-single digit STS ~ Low-to-mid single digit growth • Demand strong • Lower forecast IP growth • Investments and operational priorities • Decarbonisation upside • Semicon recovery WM ~ High-s
Slide 84: Adjusted operating profit margin increasing to 22%-23%
Adjusted operating profit margin increasing to 22%-23% 84 in the medium-term 22% - 23% Investment Returns Operational Investments ETS Improvements* ~ (100) bps 20% >23% ~ 150 bps Organic Sales WM ~ 200 bps >30% 20% Non-linear margin progression STS 23.5% CORP 2024 (2)% Long Term Medium Term *Margin
Slide 85: Operational improvements create scope for targeted investments
Operational improvements create scope 85 for targeted investments ETS Operational Organisational Digital Decarbonisation Improvement Fitness Achieve 20% margin Simplify organisational Platform and capabilities Develop technologies structure Augment existing Optimise manufacturing capability footprin
Slide 86: Medium-term capex guidance: 5-6% of sales
Medium-term capex guidance: 5-6% of sales 86 Cash Conversion: Medium term • Maintained at current level of ~80% • Opportunities in working capital management Longer term >80% Medium Term Manufacturing Manufacturing ERP Capex Drivers: Expansion Efficiency
Slide 87: Group capital allocation priorities
Group capital allocation priorities 87 1 2 3 4 5 Organic Delever Shareholder Dividends M&A growth Balance Sheet returns Aligned to investments Progressive, averaging Sharp focus on ETS Return excess capital and operational above 2x cover over integrations when appropriate priorities the cycle No int
Slide 88: Delivering our financial ambition and improving returns
Delivering our financial ambition and improving returns 88 Underpinned by the impact from investments and operational improvements Returns on Capital Adjusted Revenue Growth Capex Cash conversion Operating Margin Medium-term Long-term Medium-term Long-term Medium-term Long-term Medium-term Long-term
Slide 89: Evolving for tomorrow's world
Evolving for tomorrow’s world. Nimesh Patel Group Chief Executive Officer
Slide 90: Together for growth
90 Together for growth. Significant Addressable Market Building customer partnerships Harnessing our unique capabilities
Slide 91: Together for growth
91 Together Connected customers for growth. Significant Building Sea mless Applie d service design and delive ry Anticipating engineering Addressable £17.3bn £17.3bn £13.1bn customer customer needs Market partnerships Deep Optimising customer customers’ ins ight sys tems Harnessing our unique capabi
Slide 92: Accelerating compounding growth and margin will enhance EPS growth
Accelerating compounding growth and margin will 92 enhance long track record of strong EPS growth Proven track record of organic growth at industry leading margins 1. …with three strong growth engines Significant runway for multi-decade growth underpinned by decarbonisation 2. …building on our uniqu
Slide 93: Appendix
Appendix
Slide 94: 2024 vs 2023 TAM bridge
2024 vs 2023 TAM bridge 94 £bn 12.5 0.4 (0.7) (1.4) 10.7 3.2 2.5 4.0 2.7 5.2 5.6 2023 reported TAM Inclusion of markets Exclusion of industrial Exclusion of electric 2024 estimated TAM served by Gestra sub-sectors which are heating markets not not targets served [1] STS ETS WM [1] sub-sectors of Res