Spirax-Sarco Engineering H1 2026 Earnings Report

Spirax-Sarco Engineering EPS Results

• Actual EPS: GBX 150
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Spirax-Sarco Engineering Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Spirax-Sarco Engineering Announcement Details

• Quarter: H1 2026
• Date: 8/11/2026
• Time: Before Market Opens
• Conference Call Date: Tuesday, August 11, 2026
• Conference Call Time: 3:30AM ET

Spirax Group is positioned to play a critical role in enabling the industrial transition to net zero, aligned to our Purpose to create sustainable value for all our stakeholders as we engineer a more efficient, safer and sustainable world. We put solving customers’ problems at the heart of our total solutions approach. Our global thermal energy and fluid technology solutions improve operating efficiency and safety in our customers’ critical industrial processes. Our new-to-world decarbonisation* solutions will use our proprietary technologies to electrify boilers for the raising of steam, as well as the electrification of other critical industrial process heating applications. Spirax Group comprises three strong and aligned Businesses: Steam Thermal Solutions helps customers control and manage steam within their mission critical industrial applications, such as cleaning, sterilising, cooking and heating. We are helping to put food safely on the world’s tables and keeping our hospitals running. Electric Thermal Solutions has proprietary technologies that deliver electrification solutions at scale in industrial settings, including for the raising of steam, supporting our customers to achieve their net zero goals. We also deliver freeze protection and defrost solutions critical to aviation and space industries and ensure thermal uniformity in Semiconductor chip manufacturing to power the critical electronic systems we rely on. Watson‐Marlow Fluid Technology Solutions is engineering vital fluid technology solutions that optimise the efficient use of resources and support advancements in global health, such as lifesaving vaccines and gene therapies. Spirax Group is headquartered in Cheltenham (UK). We have over 30 strategically located manufacturing plants around the world and are committed to creating a safe and inclusive working culture for our 10,000 colleagues, operating in nearly 70 countries and serving over 100,000 customers globally. The Company’s shares have been listed on the London Stock Exchange since 1959 (symbol: SPX) and we are a constituent of the FTSE 100 and the FTSE4Good Indexes. * Eliminates scopes 1 and 2 greenhouse gas emissions when connected to a green electricity source.

Spirax-Sarco Engineering H1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Spirax Group reaffirmed its full-year guidance after delivering 5% organic sales growth, 6% organic operating-profit growth, a 19.8% margin, and 9% EPS growth in the first half—well ahead of industrial production growth.
• Positive Sentiment: The group entered the second half with strong order momentum and healthy order books. STS expects higher second-half sales and margins, ETS anticipates high-single-digit growth, and Watson-Marlow is benefiting from Biopharm orders running ahead of sales.
• Positive Sentiment: ETS was a standout performer, with 11% organic sales growth and a 220-basis-point margin improvement to 17.2%. Management remains confident in reaching the division’s 20% margin target, supported by operational efficiencies, favorable semiconductor and Heat Trace mix, and potential future pricing benefits.
• Positive Sentiment: Management highlighted longer-term growth opportunities in digital connectivity, decarbonization, semiconductors, data centers, and healthcare. Connected steam traps, energy assessments, and Powering Zero projects are expanding the addressable market and creating potential follow-on revenue.
• Negative Sentiment: The macroeconomic backdrop remains weak, with industrial-production forecasts repeatedly revised down and Germany still contracting. First-half cash conversion fell to 54% after precautionary inventory builds related to Middle East supply-chain risks, while net debt temporarily rose to £618 million, or 1.6x EBITDA.

Presentation

[Nimesh Patel, CEO at Spirax Group]

Thank you for joining this presentation of Spirax Group's half year results. I am Nimesh Patel, Group CEO, and I am joined by Louisa Burdett, Group CFO. Let me begin with summarizing our performance in the first half. We have again delivered a resilient set of results for the first half, and we remain on track to deliver our full year guidance. Across the group, our Together for Growth strategy is strengthening our differentiated business model. We are benefiting from our diversified end market exposure, and importantly, driving growth ahead of our markets in spite of external conditions is becoming increasingly embedded in how we operate. As a result, we delivered 5% organic sales growth, well ahead of IP of 1.5%. Our organic profit growth was 6%, and the operating margin progressing to 19.8%, with EPS up 9%. We achieved this while continuing to invest in future growth.

[Nimesh Patel, CEO at Spirax Group]

The group adjusted operating margin increased 10 basis points organically, with planned investments weighted to the first half. We invested in sales headcount, customer digital connectivity, and digital tools for sales effectiveness. Looking briefly at the businesses. In STS, sales grew 1%, although demand growth was more than double IP. Sales were below orders as customers specified a small number of deliveries for the second half. So we are carrying both a strong order book and demand momentum into the second half. As expected, the decline in large project demand in China has continued to moderate, partly offset by further growth in MRO and solution sales. This resulted in China being down 1% compared to the 6% decline we saw in the first half of last year.

[Nimesh Patel, CEO at Spirax Group]

ETS performed very well, with sales growing 11%, supported by strong demand growth across all three divisions and continued operational improvements that are increasing throughput and supporting strong margin progression. In Watson-Marlow, sales grew 7% with Biopharm new order intake ahead of sales. In Q2, orders reached the highest quarterly level since the COVID-related peak. In Process Industries, we continue to outperform IP. The lower STS margin of 22% reflects the phasing of shipments, but also investments in future growth that were more weighted to the first half. We expect higher margin in the second half and for the full year to be broadly in line with last year. Margins improved in ETS by 220 basis points to 17.2% through operating leverage the mix of higher margin sales from semicon and Heat Trace and delivery of operational efficiencies.

[Nimesh Patel, CEO at Spirax Group]

Watson-Marlow margin also improved on operating leverage by 80 basis points to 27.5%. Our cash conversion, which is typically lower in the first half compared to the full year, reflects planned inventory builds to offset potential supply chain disruptions caused by the Middle East conflict. Our return on capital employed has improved by 180 basis points to over 35%. Overall, our Together for Growth strategy is delivering. We continue to grow well ahead of IP. We are carrying strong order books and order momentum into the second half, and we remain confident in delivering on our reiterated guidance for the full year. Let me turn to the broader demand environment. Once again, the macroeconomic backdrop remained weak during the first half. You can see from the chart on the left that IP forecasts continue to be revised downwards for both the first and second half.

[Nimesh Patel, CEO at Spirax Group]

But this is broadly consistent with the more cautious assumptions we have adopted in our planning. The table on the top right shows that the expected recovery in IP has been pushed out to the second half, and the bottom right illustrates that industrial production has remained weak across key markets making up around half of group sales. Germany continues to contract, while growth in the U.S.A., France, Italy, and the U.K. remains modest at around 1%. To deliver on the IP forecast for the second half, growth rates would have to improve significantly in key markets. Our approach remains unchanged. We plan prudently and focus on delivering what we can control. IP can be a headwind, or it can be supportive, particularly when over a 2% tipping point above which we start to see a real step up in customer activity.

[Nimesh Patel, CEO at Spirax Group]

What our performance is reinforcing is our ability to self-generate demand to drive organic growth. What I am most pleased with is that driving growth against challenging external conditions is becoming embedded in how we operate because of our strategy, because of our execution, and because of our investments. This highlights an important point. Our growth is linked to IP, but it is not reliant on IP. The resilience of our growth is underpinned by the breadth of markets and customers we serve, which is a key strength of our group. Our growth potential is underpinned by our position in attractive sectors exposed to supportive long-term growth trends and by our ability to take market share through our focus on solution selling. The long-term growth trends I am referring to are evident in all three businesses.

[Nimesh Patel, CEO at Spirax Group]

Process optimization, what we do every day across multiple sectors to help our customers with their process reliability, energy costs, higher throughput, lower scrap, safety, essentially their efficiency and effectiveness as they meet increasing consumer demand. Health, where we serve the biotech and pharmaceutical markets as well as medical devices and hospitals, all benefiting from an aging population and innovative advances in healthcare. Technology, where we are finding new applications in semicon, data centers, nuclear, and aerospace and defense through new product development, benefiting from how technology is changing the way we live and work. In ETS and STS, we benefit from the trend towards electrification, which is how our customers in all sectors will deliver on their sustainability targets.

[Nimesh Patel, CEO at Spirax Group]

Around 40% of group sales are in sectors where these trends are driving high growth, and around 60% are in sectors with good growth where we are also increasingly taking market share. Importantly, across our three businesses and across all our end markets, we leverage the same differentiated business model to deliver on the opportunities we see. Direct sales engineers build deep customer insight through sector focus and local presence. They are experts in customers' mission-critical processes and applied engineering expertise enables us to solve customers' problems and deliver measurable value with 85% of our sales funded by customers' operating budgets. This combination allows us to consistently generate demand growth ahead of IP, and it is why we remain confident in our ability to deliver our medium-term targets and above these in the long term.

[Nimesh Patel, CEO at Spirax Group]

Speaking of the medium term, let me explain why we remain confident in achieving the organic sales growth targets we set out in 2024. As you know, we have three strong engines of growth, starting with STS. Progress in execution of our commercial excellence initiatives is enhancing demand growth relative to IP. I will speak later about how we're investing in direct sales, reshaping partnerships with distributors, and driving growth through digital connections. China has been a headwind for growth over the past two years, but we are repositioning our business in China, and as expected, we continue to see a moderation in the decline of large projects, as well as strong growth in MRO. As a result, we are on track to improve growth within our low to mid-single digit range.

[Nimesh Patel, CEO at Spirax Group]

In ETS, sustained strong demand across all our divisions and our focus on operational improvements to deliver into that demand underpins our target of above mid-single digit growth. We are delivering above that level. In Watson-Marlow, the underlying market growth in Biopharm, coupled with our success at taking market share in target sectors within Process Industries, supports high single-digit growth. Taken together, these drivers support sustaining and enhancing our mid-single digit organic sales growth at a group level while continuing to build on our long track record of growth ahead of industrial production. Now, I'll hand over to Louisa for a deeper dive into our first-half financial performance.

[Louisa Burdett, CFO at Spirax Group]

Thanks, Nimesh, and hello, everyone. As usual, the numbers I'm presenting are on an adjusted basis, excluding amortization of acquired intangibles. The prior year numbers also exclude the cost that related to the restructuring program we undertook last year. There were no P&L charges for restructuring in the first half, although you will note GBP 5 million of cash outlay in the cash flow statement, which reflects timing of settlements. As a reminder, our definition of organic growth excludes both the effect of currency movements on sales and profit and the impact of any M&A of which there was none in this or the prior year. Group performance in the first half was in line with our expectations and sets us up well to deliver our full-year guidance. We delivered mid-single digit revenue growth, increasing 5% organically well ahead of IP and with growth in all three businesses.

[Louisa Burdett, CFO at Spirax Group]

Adjusted operating profit increased by 6% organically with adjusted operating margin improving 10 basis points to 19.8%. Margin progression was driven by strong performances in ETS and Watson-Marlow, partly offset by a reduction in STS margin, which I'll come onto shortly. Adjusted earnings per share increased by 9% to GBP 1.50 per share, reflecting the growth in adjusting operating profit together with stable financing costs and a stable tax rate. The board has declared an interim dividend of GBP 0.504 per share, representing an increase of 3%. With dividend cover returning to the board's target range, future dividend growth will more closely reflect underlying earnings growth while maintaining our commitment to sustainable shareholder returns and our capital allocation framework. I'll now take you through the drivers of sales and profit performance starting with the sales bridge.

[Louisa Burdett, CFO at Spirax Group]

First half organic sales growth was 5%, well ahead of IP, there was a negligible impact of GBP 1 million from FX. All three businesses delivered organic growth. In STS, mid-single-digit demand growth translated into organic sales growth of 1%, with some shipments specified by customers for delivery in the second half. As Nimesh has already explained, China is performing as expected. ETS delivered another strong performance against a strong comparative with organic sales growth of 11%. We are driving the demand, which is reflected in strong order books across all three divisions, including double-digit growth in semicon. Our continued operational progress in process heating also had a positive impact on throughput. In Watson-Marlow, sales grew 7% organically. As expected, new orders in Biopharm have remained above sales, benefiting from strong consumables demand, while new capacity demand is still recovering.

[Louisa Burdett, CFO at Spirax Group]

Process Industries has continued to significantly outperform IP as we grow our market share in our target sectors. Moving to the operating profit bridge, where group profit increased 6% organically with FX driving a 2% tailwind or GBP 3 million. Looking first at STS, adjusted operating profit declined 6% organically and the margin was 170 basis points lower at 22%. This is largely a function of timing, reflecting the phasing of shipments. In addition, we also made considered investments in sales headcount and digital capabilities, which were weighted to the first half. In ETS, adjusted operating profit increased by 27% organically, significantly ahead of its strong sales growth. Margin improved by 220 basis points to 17.2%. What we are doing here is working with the margin progression in the first half anchored in each of our ongoing operational actions.

[Louisa Burdett, CFO at Spirax Group]

As a reminder, these are strong volume growth, improved operational efficiencies, the absence of lower margin legacy orders, and a favorable mix from higher margin semicon and Heat Trace sales. These drivers were partially offset by ramp-up costs associated with our new medium-voltage facility and consistent with the other two divisions, continued investment in sales headcount and capabilities. Encouragingly, ETS delivered a 20% margin in the month with the highest shipments, demonstrating the strong profit characteristics of this business. Finally, looking at Watson-Marlow, adjusted operating profit increased 11% organically with margin improving 80 basis points to 27.5%. The margin improvement was driven by operating leverage on higher volumes as well as ongoing implementation of manufacturing and supply chain efficiencies, offset by some focused investment in sales capabilities, digital solutions and new product development.

[Louisa Burdett, CFO at Spirax Group]

I'll now turn to cash flow, where adjusted cash from operations was GBP 92 million, resulting in a cash conversion of 54%. A lower level of cash flow in the first half does reflect the normal seasonality of our business, and we continue to expect full-year cash conversion of around 90%. However, our absolute cash from operations and conversion were lower than the first half of 2025, and this reflects actions we took to build inventory to mitigate supply chain disruption that we anticipated in response to the conflict in the Middle East. Our capital expenditure was around 3% of sales, reflecting continued discipline in allocation as we prioritize investments in projects that support future growth whilst maximizing the use of our existing manufacturing capacity. We now expect full-year CapEx to be at the lower end of our guidance range of 4%-5% of sales.

[Louisa Burdett, CFO at Spirax Group]

We ended the half with net debt of GBP 618 million and a net debt-to-EBITDA ratio of 1.6x. Whilst this is temporarily outside our target range of 1x-1.5x, it is not unusual for the normal cycle through the year, particularly with the recent payment of the interim dividend. We fully expect to be back within this range by the end of the year as we continue our focus on deleveraging. Let me now turn to the outlook for the second half and the full year. As we have outlined, we ended the first half with strong demand momentum and healthy order books across all three businesses, providing good visibility and confidence in our second half delivery. Our initiatives being sponsored through our operational excellence growth driver continue to underpin sales conversion.

[Louisa Burdett, CFO at Spirax Group]

In STS, we expect higher sales growth in the second half, driven by shipments from the strong order book at the end of the first half, which is unwinding as anticipated, as well as further progress in driving self-generated demand. We anticipate second half margin to be higher than the first half, consistent with our typical 45%-55% weighting of adjusted operating profit. This margin reflects operating leverage from higher second half sales shipments, driving a full year margin broadly in line with that of 2025. In ETS, we expect high single-digit sales growth in the second half, even against the strong double-digit comparator from last year. This is supported by the strong demand environment and large order books in all three divisions. Margin will be slightly ahead of the first half.

[Louisa Burdett, CFO at Spirax Group]

Finally, in Watson-Marlow, as we have said, Biopharm orders remain ahead of sales and Process Industries entered the second half with a strong and growing order book. Overall, for Watson-Marlow, we expect high single-digit sales growth in the second half, with margin broadly similar to the first half. A word on FX. If FX rates were to remain at today's levels, we would expect a negligible impact on both revenue and profit for the full year. To give a little bit more color, in the first half, there was a negligible impact on revenue and a tailwind of 2% on profit. Therefore, we are expecting the second half revenue impact to be again negligible, but profits to be impacted by a 2% headwind, which gets you to the full year guidance.

[Louisa Burdett, CFO at Spirax Group]

To summarize then, we anticipate higher sales volumes in the second half, driving improved operating leverage across the group, combined with the continued benefits from operational efficiency initiatives. This gives us confidence in margin progression through the remainder of the year. We are on track to deliver our full year guidance. I want to finish by reminding you why we remain confident in the medium-term margin targets that we set out at our Capital Markets Day in 2024. Nimesh has already taken you through this slide and the sales drivers that underpin our medium-term targets, so let me now take you through the margin drivers. The actions we have taken over the last two years are increasingly gaining traction as we continue to hold and meet the expectations that we set, supporting our confidence in delivering a group margin of 22%-23% over the medium term.

[Louisa Burdett, CFO at Spirax Group]

The remainder of the journey to that 22%-23% will be largely driven by ETS and Watson-Marlow. If I start with ETS, we remain on track to deliver our 20% margin target. The backlog of lower margin legacy orders has cleared, demand remains strong, operational improvements continue to increase our efficiency, and our mix is benefiting from the growth in higher margin semicon and Heat Trace sales. As our lead times continue to improve, we also see opportunity for further value-based pricing, although we expect this to be more of a factor through 2027 and beyond. In Watson-Marlow, it is simple. As we have said before, this business is well invested and the path to over 30% margin is clear. It will come from operating leverage from a sustained level of higher sales.

[Louisa Burdett, CFO at Spirax Group]

Finally, in STS, we remain confident in delivering margins of 23.5% over the medium term as we have proven consistently we are capable of. Higher sales volumes, continued operational improvements, and the benefits of organizational initiatives will support that progress. Taken together, the strong progress we have evidenced in ETS, the operating leverage in Watson-Marlow, and the proven history of STS underpin our confidence in delivering our group medium-term margin target of 22%-23% while continuing to drive attractive returns on capital. Nimesh, I am handing back to you.

[Nimesh Patel, CEO at Spirax Group]

Thanks, Louisa. Let us turn now to some of the key drivers of our performance in the first half. First, a brief reminder of our Together for Growth strategy. At the foundation is our differentiated business model. Building on that foundation, we are executing against three operational priorities, commercial excellence, operational excellence, and organizational fitness. These priorities are strengthening our sales effectiveness, improving manufacturing efficiency, and helping us leverage the scale of our group. We are also creating the capacity to invest in attractive future growth opportunities, particularly through digital and services and decarbonization, where we see significant long-term potential. Together, these support delivery of our financial ambition. Moving to how we are delivering on our operational priorities, last year, our restructuring program simplified our organization's focus on customers to accelerate growth, supported by reinvestment into key initiatives. We are seeing the benefits of the changes we made last year.

[Nimesh Patel, CEO at Spirax Group]

Establishing Heat Trace as a standalone division within ETS, benefiting from dedicated sales engineers, is contributing to strong growth in this high margin part of ETS. Similarly, in Watson-Marlow, our sectorized sales teams continue to build on the double-digit demand growth we saw at the end of last year in focus sectors such as mining and wastewater. In STS, the reorganization enabled us to reinvest in sales and technical capabilities, increasing headcount by around 3%, helping drive demand growth of more than 2x IP in the first half. We are also seeing the benefits of our focus on other commercial excellence initiatives. Our cogeneration approach with STS U.S. distributors continues to gain momentum, with demand from the 22 partners onboarded in 2025 increasing by around 6%. Finally, data centers are a good example of how we are continuing to expand our addressable market across all three businesses.

[Nimesh Patel, CEO at Spirax Group]

In ETS, we see considerable opportunity in liquid-cooled load bank solutions with a growing development pipeline. We are also seeing demand in Heat Trace for freeze protection, in STS for air eliminators, and in Watson-Marlow for specialist hoses. Together, our initiatives are helping us generate demand, win share, and drive growth. Turning next to operational excellence. First, we are optimizing our manufacturing and supply capabilities. In STS, we continue to localize production by transferring casting and forging activity from EMEA to China and India, while also rationalizing and repricing some of our lower-demand products, all of which improves manufacturing efficiency. In Watson-Marlow, we have continued to ramp up production at our Devens facility in the U.S. to support strong demand, improve operating leverage, and reduce tariff exposure, while also localizing selected production and assembly activities in APAC to shorten lead times and better serve our customers.

[Nimesh Patel, CEO at Spirax Group]

In ETS, operational improvements continue to translate directly into growth and margin progression. Through higher throughput and shorter lead times, shipments of large medium-voltage heaters more than doubled in the first half. We also successfully responded to semicon demand with a further double-digit increase in shipments. Our operational priorities create the capacity to invest in the opportunities that will support our future growth. In digital and services, we continue to strengthen our customer relationships by becoming even more connected with customers' processes. I will delve deeper into this in the next slide. First, turning to decarbonizing thermal energy, we continue to make progress across our four go-to-market strategies. In STS, our Sustainability Center of Excellence, established as part of our restructuring, successfully won orders to deliver steam system audits across 80 sites for a number of multinational food and beverage customers to identify energy optimization opportunities.

[Nimesh Patel, CEO at Spirax Group]

In ETS, we secured 10 Powering Zero orders during the first half at a total value of around GBP 12 million. We are also further leveraging the combined expertise of STS and ETS through our thermal energy assessment capability. During the first half, we delivered 16 assessments across the U.S.A., Europe, and China, helping customers identify meaningful energy savings while creating significant potential pull-through revenue opportunities at an average of over 5x the initial assessment revenues. These investments are strengthening our customer partnerships, expanding our addressable market, and supporting sustained long-term organic growth. I want to spend a moment to explain the opportunity we see in digital. Over the last few years, we have invested in developing our connected products and service capabilities to create a differentiated digital offering, supported by small bolt-on acquisitions such as Cotopaxi Energy Management Solutions and Pulse Sensing Technology.

[Nimesh Patel, CEO at Spirax Group]

Our capability is helping us become even more integrated in our customers' critical processes, moving us from periodic walk-the-plant reviews to providing constant insights, data, and actionable recommendations. Today, we physically survey around one million traps every year, and that is not even our entire installed base. Our experience and expertise tell us that we need to connect around one in 10 steam traps in a steam loop to allow us to build a system-wide view. Of course, our sales engineers' knowledge of our customers' individual systems and their mission-critical processes, as well as how they operate in practice every day, is key to knowing which steam traps need to be connected. In STS, we now have 19,000 connected steam traps across 2,350 customer sites, all since 2023.

[Nimesh Patel, CEO at Spirax Group]

Our ambition is to grow beyond the 19,000 traps, firstly to 100,000, but then also recognizing that this number is only part of our growing installed base and a fraction of the industry's installed base. Through our investments, we are on track to do just that. Beyond the connected product and digital subscription revenue, our connections create significant additional value. By identifying optimization, maintenance, and replacement opportunities, we are generating pull-through revenue while helping our customers improve their reliability, efficiency, and sustainability. One example is a dairy customer operating with highly variable throughput and limited maintenance windows. They moved from physical annual steam trap surveys, which identify failed traps at a point in time, to continuous wireless monitoring across their steam and condensate loop.

[Nimesh Patel, CEO at Spirax Group]

Our solution now identifies failures as they occur, reducing energy losses and saving approximately GBP 100,000 a year for that customer, while also improving maintenance planning and delivering a short payback for them. We are excited about our digital potential and continue to evolve and adapt to ensure we maximize the opportunity. To summarize before moving to Q&A, we have again delivered on the expectations that we set out. Despite the challenging macroeconomic backdrop, we delivered resilient mid-single-digit organic growth in both sales and profit, well ahead of industrial production. We are confident in our ability to deliver on the second half. Strong order books and continued momentum across our end markets provide good visibility into growth and margin progress.

[Nimesh Patel, CEO at Spirax Group]

Lastly, a reminder that our relentless focus on execution and controlling the controllables is working, and we are embedding the mindset of driving growth ahead of our markets in how we work. As a result, we remain on track to deliver our medium-term targets and above these in the long term. Thank you. We are now happy to take your questions.

[Mal Patel, Head of Investor Relations at Spirax Group]

Morning, everyone. This is Mal. Thank you for submitting your questions online. Just to remind you can keep on doing that until the call comes to an end. I will read your questions out verbatim as I see them on the screen. First question is from Stefan on STS. Can you please explain your comment on larger orders coming back? Will that lead to an acceleration of sales going forward as the demand for these has been absent for a while now?

[Nimesh Patel, CEO at Spirax Group]

Thank you, Stefan. Good question. We talked about this in our last trading update, and we have mentioned it again in our half-year results. You are right, we are seeing what I would describe as a small uptick in large orders across our steam business. Remember, that is against a weak comparator, but it is a positive sign of our customers' activity and a supporting pillar of the longer-term increase in growth of STS. Perhaps I just take a moment here to talk about the longer-term STS growth potential. I want us to start by reminding you of the recent backdrop. We have been delivering around 3%-4% growth excluding China, which has been a headwind, and we have delivered that against a low IP in the order of around 1.5%. There are a number of things that we have been focused on.

[Nimesh Patel, CEO at Spirax Group]

The first is repositioning our business in China, and that is progressing really well as we are updating you on in these results. In the first half, China was down 1% as a result of the moderating decline in large orders, but also the continued strong growth in MRO and solutions. China is likely to return to growth. We have talked about hitting an inflection point in either late this year or the early part of next year. I can see a path to China growing at least in line with the rest of the global STS business and maybe better. When that happens, steam is back to a sort of 3%-4% growth rate. On top of that, we have got the investments that are helping us enhance the growth of steam, both digital and decarbonization.

[Nimesh Patel, CEO at Spirax Group]

That is why I wanted to spend a little bit of time talking about the digital opportunity today. I can see that adding 1% between that digital and decarbonization to the steam growth. So that is getting us to 4%-5%. The other thing to note here is that all of this is before any improvement in IP. Remember, we grow at 2x IP, so you can see how that could enhance growth further. Finally, just remember the long track record we have in steam, supported by our ability to self-generate growth. Now we have a business that is also well invested in both our sales capability but also our supply capacity. Thank you for the question.

[Mal Patel, Head of Investor Relations at Spirax Group]

Stefan has a follow-up on ETS, which is, can you comment on the 20% margin target? Are we right to assume that this is a full year target or is it an exit rate? To get there, are we right to assume you need the support of pricing initiatives which you have not done so far in the past years?

[Nimesh Patel, CEO at Spirax Group]

Let me kick that off. Louisa, I'll hand to you. We are confident in our ability to hit the 20% target for ETS. Louisa gave you a really interesting point of evidence on the quality of this business from a margin perspective in the sense that we hit 20% in a month in the first half of the year, and it happened to be the month where we shipped the highest value of product. That's not a surprise because we've talked about the drivers of getting to 20%, and volume and continued demand growth is one of them. Louisa, do you want to take that question?

[Louisa Burdett, CFO at Spirax Group]

Yeah, I think I would reiterate what Nimesh has said. The margin progression we have seen in the first half of 220 basis points is really pleasing, and it is anchored, as I said, in demand growth, efficiencies, mix, and a lack of those legacy orders. We always price for value across each of our business units, and ETS is no exception. Stefan, we do have elements of that already in our business model. We believe there is more pricing opportunity once we are fully through some of our lead time and efficiency improvements. We do see more of that after the 2027 period. It's not like we are waiting because we have a particularly strong competitive position in this market. It's a continuum.

[Louisa Burdett, CFO at Spirax Group]

In terms of the delivery, as Nimesh said, we are confident in delivering that 20% margin, and we hope that we have given you some good proof points today.

[Mal Patel, Head of Investor Relations at Spirax Group]

Good. Next, we have three questions from Chet at JPMorgan. One, could you provide a bit more color on the greater than 2x IP order momentum you're seeing in STS? Do you now see a likelihood of China being neutral in H2 rather than early 2027? Second question, this is the first time we're hearing you talk about end market exposures. Does that mean you might move away from IP as a significant driver of the business? If so, how should we think about the longer-term growth algorithm? Finally, on ETS, semis grew double-digit percentage. How sustainable is that, and what visibility do you have?

[Nimesh Patel, CEO at Spirax Group]

You might have to remind me of some of those questions when we get there. Let me start with the first one, which was about demand growth in STS. We saw greater than 2x IP demand growth in the first half. IP was 1.5%, so that's greater than 3%. Bear in mind that we saw a small impact on demand in the Middle East as a result of the ongoing conflict. The Middle East is 1% of group sales, but much more heavily weighted towards steam than the rest of our businesses. If you were to strip out the Middle East impact, that demand growth coming from the rest of the world was even better than what we are talking about here. I am really quite pleased with the demand growth in the first half in steam.

[Nimesh Patel, CEO at Spirax Group]

The second thing I would say is, what you take away from that is orders obviously well ahead of sales. As we go into the second half, we have not only a healthy order book, and remember, we're not a business that has significant coverage from our order book when you look several months out. But the order book underpins our confidence going into the second half. More importantly, the order momentum underpins our confidence going into the second half. Of course, sitting here today, we have the benefit of seeing what's happened in July, and we have the indications through our flash of what's happening in August. As we've said in our release, we are already seeing the anticipated unwind of those order books driving sales growth and the continuation of that order demand.

[Nimesh Patel, CEO at Spirax Group]

It gives us confidence in the second half performance of steam exactly as we've described it. We talked earlier in response to Stefan's question about the large orders coming back, which very early stage against a weak comp, but still a positive sign. Remember, the sales performance in the first half, which in turn has some impact on the margin together with the investments. We're talking about small numbers. 1% of steam in the first half is about GBP 4 million. That is literally the equivalent of a few days worth of shipments. So it helps probably put a little bit of that into context. The second question was about sector exposure if my memory's not failed me yet.

[Mal Patel, Head of Investor Relations at Spirax Group]

Sector exposure, does that mean that you are likely to move away from IP as a driver, and what does this mean for the longer-term growth algorithm?

[Nimesh Patel, CEO at Spirax Group]

Yeah. We are a business that operates in multiple sectors, in multiple regions of the world. All of our technologies are used by almost all sectors in some way, shape, or form. Inevitably, our business growth is going to be driven by industrial production activity. The more activity, the more consumables we will sell, the more maintenance will be required, the more the growth in demand, the greater the call on our solutions to help with effectiveness of processes, eliminating waste, driving higher throughput. These are all things that are pegged in some way to IP. However, I have also said that while we cannot be completely divorced from IP, what we can do is continue to improve the outperformance against IP.

[Nimesh Patel, CEO at Spirax Group]

Again, in the first half, we have delivered, at a group level, organic sales growth of 5% in a world where IP is 1.5%, and we have got genuine volume growth in the first half of this year. That is because of the changes that we have made through our Together for Growth strategy, through our restructuring. We are getting after the opportunities we see. What I wanted to remind everyone of with the slide on sector exposures was, one, we are diversified. We are present across a number of sectors. Two, a very significant proportion of our sales are in sectors that are very exciting, high-growth sectors. Three, that we are driving good growth and taking market share on top of that in other sectors as a result of our ability to self-generate demand and deliver solutions to our customers. Hopefully that came across.

[Louisa Burdett, CFO at Spirax Group]

Maybe I can pick up Chet's other two questions, which I think was about China progression being neutral.

[Mal Patel, Head of Investor Relations at Spirax Group]

No, it was semicon.

[Louisa Burdett, CFO at Spirax Group]

Semicon, yeah. As a high growth industry. Just picking up Nimesh's comments about customer solutions, we are seeing double-digit growth in that industry. We have close connections with our customers and very good visibility on what that pipeline looks like. It is a good high growth sector for us, and one where we're highly connected with our customers and responsive to that.

[Mal Patel, Head of Investor Relations at Spirax Group]

Sorry, Chet's second question, the second part was on China. Do you now expect it to be neutral in the second half?

[Nimesh Patel, CEO at Spirax Group]

Our confidence around China hitting that neutral point has definitely gone up given the performance in the first half and what we can see going into the second half. We've always given the range as second half of this year or early the following year. I think it's fair to say that that could well come towards the earlier end of that range rather than the latter. But there's more waters to flow under that bridge.

[Mal Patel, Head of Investor Relations at Spirax Group]

Okay. We have a question from Besik at Lombardi Capital. Could you quantify the headwind to STS's first half organic growth from the client-driven shipment phasings into the second half?

[Nimesh Patel, CEO at Spirax Group]

Look, very broadly, we're looking at a headwind that's in the low single-digit millions of pounds. So it comes back to my point of the law of small numbers here. 1% of growth in the first half for steam is about GBP 4 million. So we can see those orders, we can see them in our order book. We can see that customers have specified shipment in the second half. We can see when they're going to ship in the second half. As I said, in the first couple of months of this second half, we've already seen the unwind of that order book. So frankly, things are progressing exactly as we have laid out in our results.

[Mal Patel, Head of Investor Relations at Spirax Group]

Okay. Some questions from Rory at Oxcap. Firstly, can you quantify strong growth in STS MRO activity in China? Can you just remind us of the margin difference between STS MRO and project activity in China?

[Louisa Burdett, CFO at Spirax Group]

Rory, hi. MRO growth has continued in double digits, as it has for the last couple of periods, and obviously is a key driver of the return of China overall in STS to -1% versus -6% in the prior period. Obviously, that's also been helped by a mitigation in the decline in large orders. We have directionally always indicated that MRO margins are slightly higher than large order margins in China, but we haven't provided a specific quantification. Look, basically the growth of MRO, the continued focus on large orders makes our China business even better. As we've always said, it represents one of our best opcos. Reading the market and pivoting and having that balance across MRO and large orders makes it a stronger business overall.

[Mal Patel, Head of Investor Relations at Spirax Group]

Second question from Rory. What are the supply chain impacts you're seeing coming out of the Middle East? Is this where customers have been delaying shipments into the second half, or is that a different dynamic?

[Nimesh Patel, CEO at Spirax Group]

In terms of the delays of shipments into the second half, again, let me remind you, we are talking about relatively small numbers. We have seen that from customers in the Middle East. Clearly, it is challenging and potentially not safe to access customer sites in parts of the Middle East, and we put the safety of our colleagues above all else. However, there is an opportunity here that when it does become safe, working with our customers to access their sites, there is opportunity for us to support repairs, maintenance, ramp up, and various other activities in our customer site. That represents an upside, potentially in the second half of the year.

[Nimesh Patel, CEO at Spirax Group]

In terms of other deferrals, there are customers in other parts of the world who have been watching events in the Middle East, but also more broadly across the globe, and making decisions about how to phase their investment in the year. Some projects that they may have set out to execute in the first half have moved into the second half. We have received the orders. We know when we need to ship the projects. We have confidence in that demand coming through. In terms of the first part of your question, which was the disruption to supply chains, we took prudent action early to make sure that we could continue to support our customers with their needs. We see, I think, going forward, limited disruptions to the supply chain and where we expect them to continue.

[Nimesh Patel, CEO at Spirax Group]

We have already got plans in place, and therefore we would expect to pull down on our higher than normal inventory levels during the second half of the year, and that is what you will see in our improving cash conversion in the second half.

[Mal Patel, Head of Investor Relations at Spirax Group]

Finally from Rory on ETS. It feels like ETS is finally turning a corner. On headwinds, were the medium-voltage ramp-up costs at Ogden incremental based on the strong demand you are seeing, or were you always expecting to incur these costs in this period? As a follow-up, are there any opportunities for you as data center architecture shifts to medium-voltage?

[Nimesh Patel, CEO at Spirax Group]

ETS has been performing strongly for the last couple of years. As always, the improvement program cannot be delivered overnight. As much as I, more so than anyone else, wish it could, I have to say, I think the team there are doing a phenomenal job of getting after the opportunities, and I think that is twofold. One, around growth. You can see the strong demand growth that we are generating in ETS year in, year out. Secondly, in the ability to deliver against that growth operationally, whether that is addressing some of the historic operational issues that existed around large projects, in particular coming out of our North American factories. As a reminder, in the five years to our Capital Markets Day in 2024, output from those factories in North America was down around 10% in volume.

[Nimesh Patel, CEO at Spirax Group]

Since then, it is up over 40% in the last, what now? 2.5 years. I am really pleased with that performance. In turn, as Louisa described earlier, that continued demand growth, that ability to deliver it to customers, and the efficiency improvements that we are making are driving margin improvement, and we are not done yet, obviously, because we are going to get the margin to 20%. I have absolute confidence that this business can be a 20% margin business. I am really pleased with progress there. Sorry, what was the second part of that question?

[Mal Patel, Head of Investor Relations at Spirax Group]

Yeah. The second part was on data centers. We will come to that in a minute.

[Nimesh Patel, CEO at Spirax Group]

Okay.

[Mal Patel, Head of Investor Relations at Spirax Group]

Because there is another question on the ETS margin. This is from Andy at Jefferies. Is the 20% margin target for ETS now too low if you have already hit it in the first half? That is without pricing.

[Nimesh Patel, CEO at Spirax Group]

Yeah. Andy, it is without pricing. You are right. Pricing represents an upside. If I answer a slightly different question to the one you have asked, then you can hold me to account if you do not like my answer. This business is capable of achieving greater than 20% margins. I am clear on that. The question for us as a management team is how do we balance higher margin against greater investment in sustaining and enhancing the longer-term growth of this business? Our judgment is that, look, let us get to 20%, but when we get to 20%, there are some really interesting incremental opportunities, even above what we are doing today, to invest in the longer term of growth of those business.

[Nimesh Patel, CEO at Spirax Group]

That is not holding us back today, but as I look out five years, 10 years, and longer, I think these are investments that will really help us continue to, as I say, sustain, but also enhance high levels of growth from ETS. We will make those judgments once we get to 20%, and we will decide, do we think that margin could be a little bit higher, another 100 basis points or so? Or do we think we put that money back into investing in longer-term growth? I am pretty clear that investing in longer-term growth and the compounding nature of the returns that that delivers is attractive for our investors.

[Mal Patel, Head of Investor Relations at Spirax Group]

Two questions from Max at Morgan Stanley. Firstly, on steam, could you please elaborate on the second half margin performance that you expect, and what are the key levers in going from a first half decline to a recovery in the second half? Second question on Watson-Marlow. Orders and end market momentum suggest another strong year of growth in Watson-Marlow into 2027. Is there any reason we should not be able to continue at the circa 50% incremental margins into 2027? Are there any areas of investment that are needed in the business that could dampen operational leverage into 2027?

[Nimesh Patel, CEO at Spirax Group]

Do you want to take that, Louisa? Just as a reminder, our margin in the first half is up organically 10 basis points. I think that first question is specifically about STS, is not it?

[Mal Patel, Head of Investor Relations at Spirax Group]

Yeah.

[Nimesh Patel, CEO at Spirax Group]

Louisa, do you want to take that?

[Louisa Burdett, CFO at Spirax Group]

Yeah, Max. The strong order book that we've talked about in steam, 2x IP in the first half, is one of the drivers of our second half sales growth, and we've been clear that we're seeing the characteristics of our July performance reflecting that unwind. As Nimesh has said, second half sales growth will also be underpinned by the team's ability to continue to generate demand. Obviously, that higher sales growth gives us more operating leverage than the first half, which has a margin benefit. We have talked about the fact that we have put more investment into the first half around our commercial excellence initiatives, which is clearly generating a return in the order book. But we expect that level of investment to taper off in the second half, and that will be another add to the margin in the second half for STS.

[Louisa Burdett, CFO at Spirax Group]

I think on Watson-Marlow, we've always talked about Watson-Marlow being well invested. We've talked about investment on the East Coast of America in our Boston facility, as well as the Falmouth facility in Cornwall, and all of the operational excellence initiatives that we're working on in Watson-Marlow in common with the rest of the business. Look, we will continue to make investments in new product development. We've had huge success with initiatives like WMArchitect. As Nimesh has said, for ETS, the same applies in Watson-Marlow. We need to balance the investment to continue that compounding growth in this important division. But in terms of big facility investments, we don't see a huge need for that at the moment. So at the margins, we will continue to invest, but the basic growth algorithm and the drop-through remains intact.

[Nimesh Patel, CEO at Spirax Group]

Can I just add to your answer in terms-

[Louisa Burdett, CFO at Spirax Group]

Of course you can.

[Nimesh Patel, CEO at Spirax Group]

-of the investments we've made in the first half in steam, which you're seeing the impact of in margin, but we'll see the improvement in margin in the second half. Just to give you a bit of a sense of what these are. As we said last year, as a result of the restructuring, we wanted to reinvest the savings in building and rebuilding to a degree. I talked in 2024 at the Capital Markets Day about the need to increase investment in steam to drive longer-term growth. Rebuilding our sales capability in particular. We've added in the order of 100 sales and technical colleagues into the steam business. Now, obviously, the timing from realizing the benefits from the restructuring to then finding the people, bringing them on board, and having them on payroll, there's a bit of a lag in reinvesting.

[Nimesh Patel, CEO at Spirax Group]

That's why you're seeing the run rate cost of those people coming through in the first half of this year rather than in last year. We've also put more money into cyber and IT, but also our digital connections, which I described earlier in my presentation. Those are the areas where the investment has gone. The positive is we've rebuilt that. Yes, it'll take some time for some of those folks to be delivering the full return on the investment, because typically it takes two to three years for a sales engineer to get to full run rate delivery. But having said that, our investment is now complete. We're largely done. I'm not seeing any sort of significant or material new investment in the second half of this year.

[Nimesh Patel, CEO at Spirax Group]

When you see the order book we've got, the order momentum we've got going into the second half, as I said, we're already starting to see the benefits of that in July and August. Together with the investments we've already made with no new investments coming through, the second-half drop-through for steam is high, and that's why we have confidence in the margin guidance that we've shared today.

[Mal Patel, Head of Investor Relations at Spirax Group]

Okay. A few questions from Jonathan Hurn at Barclays. How much was the cost under absorption from the ramp-up of the new capacity at Ogden in the first half? Will this fall in the second half, and will it be eliminated in 2027? Do you want to do that, and then we will move on.

[Louisa Burdett, CFO at Spirax Group]

Jonathan, it is a minor offset against the other positive drivers in ETS, largely because we have got a new facility that is not yet at capacity, so the fixed costs are being absorbed over smaller units, but as the smaller number of units, I beg your pardon. But as Nimesh has said, we have given you some metrics about how the productivity of the whole of the Process Industries production environment is increasing. We did anticipate some level of under-absorption of fixed overheads, and we will probably see a little bit going through the second half and maybe into 2027. It really depends on the mix that we get in ETS. But look, we have delivered sequentially 10% sales growth, 12% sales growth, 11% sales growth, and this machine is starting to get a lot more productive, and as that capacity ramps, we will get to normality on the unit cost coverage.

[Louisa Burdett, CFO at Spirax Group]

But I cannot give you a specific date when it goes away.

[Mal Patel, Head of Investor Relations at Spirax Group]

As a follow-up on ETS, again from Jonathan. In the first half, how much higher were Heat Trace and semicon margins versus the ETS average?

[Nimesh Patel, CEO at Spirax Group]

Jonathan, very simply, Heat Trace and semicon margins are over 20%. I would say slightly over 20%. As Louisa has just described, we are on a path to improving our margins in the process heating part of our business, which is about 60% of the total of ETS.

[Mal Patel, Head of Investor Relations at Spirax Group]

Two other questions from Jonathan. Was the 1% down sales in China also impacted by project shipments?

[Nimesh Patel, CEO at Spirax Group]

Yes, because we are seeing the moderation of the decline in large orders, not yet growth in large orders. That will be part of the impact on the 1%, and of course, offset by the growth in the MRO and solution sales.

[Mal Patel, Head of Investor Relations at Spirax Group]

Okay. We have had a number of questions on Watson-Marlow, which you guys will forgive me if I just group them because you have all asked the same question. What were the growth rates of Process Industries and Biopharm in Watson-Marlow? Can you talk us through the margin differential between Process Industries sales and Biopharm sales?

[Nimesh Patel, CEO at Spirax Group]

Okay. Take the latter question first because it is easier. There is no substantial difference between the margin in Process Industries and Biopharm. Essentially, we are supplying peristaltic pumps, specialist hoses, even single-use consumables into various different sectors. Food and beverage will be a consumer of single use just like Biopharm will. There is no material difference in margin between Process Industries and Biopharm. In terms of the growth rate, we have not quantified the individual growth rates, but what I think you can read into the results is we have got 7% organic growth in Watson-Marlow in sales. We have told you that orders are above sales.

[Nimesh Patel, CEO at Spirax Group]

Just to give you a little bit more color, to be helpful around Biopharm, what we are seeing, and forgive me if this sounds boring although that is probably reassuring, or it should be, the end user demand that I have been talking about continues to perform well. In particular, we are seeing the pull-through of consumables as those end users are essentially using their existing capacity and maximizing the use of their existing capacity. Where we are still seeing a gradual recovery, and remember I talked way back in 2024 about this being a U-shaped gradual recovery, is in the new expansion activity. We are still seeing that coming back slowly. People are building new capacity, but not at the rates that they used to. However, we can see the pipeline of projects coming through. We can see that that is recovering.

[Nimesh Patel, CEO at Spirax Group]

Note, this is really around larger customers building that capacity. In fact, a number of these customers are shifting their investment. A particular trend is investment coming out of the U.K. and out of Germany and going into the U.S. and going into China as well. We are really well-positioned to pick up that demand wherever it is. If it is in EMEA, if it is in APAC, if it is in Americas, we will pick it up. But when they shift their projects from one geography to another, it does cause delays. Feeling pretty good about Biopharm demand. Just as another reminder, in the second quarter of this year, we saw the highest quarter of any since COVID in terms of Biopharm orders. It was a peak for us. Again, just further evidence of the ongoing recovery in that space.

[Mal Patel, Head of Investor Relations at Spirax Group]

Okay. Question on STS from Emanuele at Kepler. Could you give more color on how much of the second half revenue and margin recovery is already secured by the existing order book? Given your cautious view on the IP recovery, would you still expect to deliver full year guidance if IP remains around the first half levels rather than improving?

[Nimesh Patel, CEO at Spirax Group]

On the IP question first, essentially yes, because we have taken a more conservative view of what IP will do in the second half. There is more nuance to that answer because obviously it depends on where IP is up and where IP is down. But fundamentally, we are not relying on a material recovery in IP to deliver our numbers. Second point is, to answer the first part of your question, sorry, is our order books, because we book and ship typically about 40% in the month and around 80%-85% within three months, the order books do not necessarily give you a high degree of visibility going into the second half.

[Nimesh Patel, CEO at Spirax Group]

But what it does give us is confidence that there is immediately, given the higher level of the order book at the end of first half, there is immediately a body of shipments that we can see that have been carried into the second half. So that is a positive. As I said earlier, the second thing that we continue to see is the order momentum being carried from the first half into the second half. That is why we have confidence in the delivery of the second half growth in steam. As I also said earlier, with the investments we have made really at the end of last year and then at the beginning of this year, where you are seeing the kind of the run rate impact of that in the first half. Given those investments, they will not be increasing from here.

[Nimesh Patel, CEO at Spirax Group]

We can also see the high level of drop through in the second half for STS, which in turn gives us the confidence on the margin. Just to remind you, and this is very typical of Spirax of old, the H1, H2 sales split we are looking at is 48%, 52% first half, second half, and the profit split we are looking at is 45%, 55%. That is not unusual in terms of seasonality for our business.

[Mal Patel, Head of Investor Relations at Spirax Group]

Okay. Question from Martin Wilkie at Citi. In semiconductors for ETS, if China advances in homegrown lithography equipment, is that end market open for ETS to supply? Could you remind us of the latest split of semiconductor exposure within ETS?

[Nimesh Patel, CEO at Spirax Group]

Yes. Equipment heating in ETS is about 25% of sales, and half of that is semicon. You are looking at 12.5% of sales. Those are 2025 numbers, and then we have seen high growth since then. They will shift a little bit for this year going up in semicon. In terms of the question around APAC, we are working with our customers to establish an even stronger footprint in the APAC region to serve them. Here we are talking broadly around international customers, U.S. and European. We are also building our presence in China to be able to serve the domestic market.

[Nimesh Patel, CEO at Spirax Group]

The advantage we have is that in the spaces in which we play, and as a reminder, that is atomic layer deposition, that is lithography, and that is etching, all parts of the wafer fabrication equipment process, or different types of wafer fabrication equipment across the process. Those areas in which we play have very specialized and highly technical requirements around electrical thermal energy in those processes. That requires a high degree of expertise and R&D where we are very well-positioned to be able to solve our customers' problems. It is not clear to me that expertise exists in other parts of the world or within other companies. It is a relatively small set of players in this space, and I think that, in turn, gives us the ability to be able to win that business and compete in China. But I do not want to be complacent about that.

[Nimesh Patel, CEO at Spirax Group]

There is work we have to do, investment we have to make, capability we need to build within China to get after that demand. Of course, at the end of the day, there may also be some regulatory restrictions that we will have to be cognizant of. But there is no structural reason why we could not compete.

[Mal Patel, Head of Investor Relations at Spirax Group]

I think we have time for two final questions, which happen to be about capital allocation. Firstly, from Emanuele at Kepler. "Do you see M&A as a meaningful contributor to growth over the medium to long term?" Then from Varun at Xantium, "What conditions do you need to see a share buyback, given the expected strong free cash flow and current market value of your equity? When would you consider a buyback?"

[Nimesh Patel, CEO at Spirax Group]

Do you want me to do the first one, Louisa, and you do the second one?

[Louisa Burdett, CFO at Spirax Group]

Sure thing, yeah.

[Nimesh Patel, CEO at Spirax Group]

On the first one, yes. Bolt-on acquisitions are part of our approach to capital allocation. I think we are at a point now where having demonstrated that we are delivering, not yet fully delivered, but delivering the value from the ETS acquisitions. Demonstrating the success we have had with a number of small bolt-on acquisitions like Cotopaxi, like Pulse, like some of the smaller distributors that we have bought in steam, albeit a couple of years ago. We are confident in our ability to identify the right targets, bring them in at the right valuations, drive high returns from these acquisitions, and accelerate our organic growth, and also bring the margins up on these businesses that we buy. Where it comes to small bolt-ons, I think these are very much on the agenda for us, and we are putting time and effort into identifying those targets.

[Nimesh Patel, CEO at Spirax Group]

We will remain highly disciplined. Whilst we have looked at a number of opportunities where the multiples are high and therefore the returns are low, we will step back from them, and we always benchmark those opportunities against alternative uses of capital. One of which is our ability to put more money into new product development, and hence accelerate our growth through that way, and another is obviously buybacks. Louisa, I will hand over to you on that bit.

[Louisa Burdett, CFO at Spirax Group]

Yeah. We clarified our capital allocation framework at the end of 2025. To Nimesh's point, we continue to believe that reinvesting in organic opportunities as well as the inorganic opportunities that Nimesh has just talked about, is the best source of compounding growth for this business. But we have also been very clear that if we get to the bottom end of our leverage range, which we stated publicly at 1x-1.5x, and there are no good opportunities that generate those sorts of returns that we're seeking, then we will obviously be considering a buyback at that point.

[Mal Patel, Head of Investor Relations at Spirax Group]

Good. Thanks, guys. That is it in terms of questions.

[Nimesh Patel, CEO at Spirax Group]

Thanks very much, everyone, for joining us. Look forward to seeing you soon. Thank you

Participants

Analysts

• Nimesh Patel, CEO at Spirax Group
• Louisa Burdett, CFO at Spirax Group
• Mal Patel, Head of Investor Relations at Spirax Group