Engineering sustainable growth

Annual Report 2018

A snapshot of 2018

  • Revenue growth of 15%, organic sales growth of 7%

  • Adjusted operating margin of 23.0%, down 60 bps; organic margin up 120 bps to 25.2%

  • Strong organic sales growth in Steam Specialties and Watson-Marlow

  • Gestra and Chromalox performing well

  • Net debt of £235.8 million as at 31st December 2018, 0.8x EBITDA

  • Full Year dividend increased by 14%

A year of sustainable growth

In 2018, an important internal milestone was reached as the Group’s sales exceeded £1 billion for the first time in our history.”

Jamie Pike

Chair

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Our performance by segment

Record revenue and adjusted operating profit, achieved through a combination of strong organic growth and the incremental contribution of acquisitions made in 2017.”

Nicholas Anderson

Group Chief Executive

Spirax-Sarco Engineering plc

Spirax-Sarco Engineering plc is a multi-national industrial engineering group, with expertise in the control and management of steam, electrical thermal energy solutions, peristaltic pumping and associated fluid path technologies.

Watson Marlow EMEA EMEA EMEA Chromalox
Hand Icon

Click on a segment of the pie chart for more information.

Spirax-Sarco Engineering plc

Spirax-Sarco Engineering plc is a multi-national industrial engineering group, with expertise in the control and management of steam, electrical thermal energy solutions, peristaltic pumping and associated fluid path technologies.

Group revenue

£1,153.3m

2017: £998.7m

Reported

+15%

Organic

+7%

Group adjusted operating profit

£264.9m

2017: £235.5m

Reported

+12%

Organic

+12%

Group adjusted operating margin

23.0%

2017: £23.6

Reported

-60 bps

Organic

+120 bps

Our strategy

Five years ago, we undertook an extensive strategic review and developed our strategy for growth, the aim of which is to deliver self-generated growth that outperforms our markets. We identified six Group strategic themes, which help us to do better what we already do well.”

Nicholas Anderson

Group Chief Executive

Download Group Chief Executive's Statement

Our strategic objective: To deliver self-generated growth that outperforms our markets

Our strategic focus: Doing better what we already do well

Our six strategic themes:

Click for examples of our strategy in action

1. Increase direct sales effectiveness through market sector focus Strategy 1 Icon

Combining products designed to meet specific industry requirements with the application knowledge of our sectorised sales engineers, increases direct sales effectiveness. To this end, and in response to a customer request, within 18 months Spirax Sarco developed the innovative STAPS ISA100 Wireless Steam Trap Monitoring device, specifically designed for use in the Oil & Gas industry, to drive down energy and water wastage. Due to the large trap population on many Oil & Gas facilities, failed traps can go unnoticed for an extended period of time. Wireless monitoring enables customers to identify and quickly address failed traps, reducing costs and environmental impacts. STAPS ISA100 is certified as safe to operate in areas where there is a risk of explosion or restrictions due to flammable atmospheres.

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

Lukas Grech joined Spirax Sarco’s graduate programme in Cheltenham, in 2013. Following several placements around the business he took a permanent role in Spirax Sarco Australia as a sales engineer and is now Sales Manager for the state of Victoria. The Spirax Sarco Academy has played a key role in Lukas’ progression in the company. He used it to develop his own product and applications knowledge and now uses it to measure and meet his team’s development needs. “The Academy benefits my team” said Lukas, “by placing 100+ years of Spirax knowledge at their fingertips. My team is young and the Academy allows them to fast track their knowledge intake, which in turn ensures that they can provide the advice and quality of service that customers expect from Spirax Sarco.”

3. Broaden our global presence Strategy 3 Icon

In 2016, Watson-Marlow established an office in the United Arab Emirates (UAE), located in Spirax Sarco’s premises in Sharjah, to support 3rd party distribution. Having demonstrated that there was a demand for Watson-Marlow’s product offering, a trading company was established and direct sales commenced in March 2018. Reon Durgapersad, a sales manager from Watson-Marlow South Africa, transferred to the UAE in 2016 and leads the small, but growing, team. Experiencing high levels of investment in the Water, Biotechnology and Food & Beverage industries, and having customers that value globally recognised brands with a strong reputation for reliability and quality, the Middle East is a relatively untapped market with strong growth potential for Watson-Marlow. During its first year of trading, the new company performed in line with plan, meeting stretching performance targets.

4. Leverage our R&D investments Strategy 4 Icon

In December 2018, Chromalox launched a new line of steam boilers, incorporating patented DirectConnect™ technology. The high capacity steam boilers are uniquely designed for large industrial applications and offer steam output of up to 9,685kg/hr, and standard pressures of up to 31 bar. Chromalox DirectConnect™ boilers operate with an advanced power control system that delivers instantaneous power conversion to heat energy and ensures that all available power is directly delivered to the process. The boilers are the first of their kind in the industry; no other technology exists that can match the voltage range, third party certifications, and patented control methodology of Chromalox’s DirectConnect™ medium voltage system. This technology provides customers with safe, highly efficient, emission-free and cost effective electric solutions for their large process heating needs.

5. Optimise supply chain effectiveness Strategy 5 Icon

We strive to deliver outstanding customer service, with On Time to Request (OTTR) a key operational metric. During 2018 Spirax Sarco France conducted detailed process analysis and identified a programme of initiatives to improve OTTR performance. These included changes to customer touchpoints, with a new format developed for quotations and a new process for customer order collection; closer collaboration with customers to understand their needs; more effective credit hold management systems to prevent delays if customers unknowingly exceed their credit limits; and weekly cross-functional team meetings to increase collaboration, resolve delays, identify process improvements and establish shared priorities. As a result of these initiatives, Spirax Sarco France has seen a strong improvement in OTTR over the course of the year.

6. Operate sustainably and help improve our customers’ sustainability Strategy 6 Icon

During 2018, employees of Spirax Sarco Thailand worked together to build a chicken and a mushroom farm at a rural school in central Thailand. The project, which also included the design and installation of an irrigation system, was funded by Spirax Sarco and employees contributed working and free time over a period of two months to complete the project. Children at the school – many of whom previously went hungry as their parents could not afford to pay for school meals – will now receive nutritious lunches and will be taught agricultural skills to increase their self-sufficiency in the future. Spirax Sarco Thailand is the “small company” winner of the Group’s 2018 Community Engagement Award and plans to spend the £5,000 prize money constructing greenhouses and an integrated duck and fish farm at the school.

Sustainability overview

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The industries we serve

We apply our expertise in engineering products and solutions across a diverse range of sectors and end users.

Click the diagram for more information.

Steam 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.

17% of Group revenue

Food
Steam 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.

3% of Group revenue

Beverage
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.

16% of Group revenue

Pharmaceutical
Original 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.

14% of Group revenue

Machinery
Electrical 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.

7% of Group revenue

Oil
Steam 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.

7% of Group revenue

Chemical
Steam 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.

4% of Group revenue

Healthcare
Electrical 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.

4% of Group revenue

Power-generation
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.

4% of Group revenue

Buildings
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.

3% of Group revenue

Mining
Peristaltic pumps are used to dose chemicals during water treatment processes and to transfer viscous and abrasive slurries. Electrical heating solutions provide freeze protection, temperature maintenance and space heating in water treatment plants.

3% of Group revenue

Water
Our 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.

2% of Group revenue

Paper

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