Engineering
our future
Spirax Group Annual Report 2023
Spirax-Sarco Engineering plc
Our colleagues
Empowering future
leaders
See pages 16-17
Our customers
Developing
solutions for future
customer needs
See pages 58-59
Engineering our
future through
continuity and
progression
The decisions we have taken
over the course of our history
enable our sustainable growth,
influence the value we create
and have a lasting impact for our
stakeholders in the future.
Our communities
Enabling future
generations
See pages 82-83
Our environment
The future of
sustainable steam
See pages 92-93
Our suppliers
Embedding
sustainability into
our future
See pages 96-97
Our shareholders
Engineering our
future, together
See pages 116-117
Strategic Report
Spirax Group is the new name for
Spirax-Sarco Engineering.
It balances our history and where we have
come from with who we are today, and is a
natural evolution for our Company.
Spirax Group is different but also familiar. Its simplicity aims
to create clarity, by representing everyone and everything
that we do and eliminating the confusion between the name
of our Group and the Spirax Sarco Division that provides
steam thermal solutions to customers. As Spirax Group,
we are staying true to our heritage while also reflecting our
evolution to a much larger and stronger organisation.
We are inviting our shareholders to support our legal name
change to Spirax Group plc at our AGM in May.
Read about our brand story overleaf
See pages 46-49
See pages 54-57
See pages 50-53
A progressive decade...
Events of the last ten years have significantly contributed
to the growth and evolution of our Company and are
reflected in our decision to refresh our Brand. 2024 marks
the culmination of an important era in our Group’s history
and lays strong foundations for our future as Spirax Group.
2014
Acquired
BioPure
2016
Acquired
Aflex Hose
2017
Launched our
Global Graduate
Programme
2019
Acquired
Thermocoax
2015
Acquired Asepco
and Flowsmart
2017
Acquired Gestra
and Chromalox
2018
Joined the
FTSE 100
Our refreshed brand signifies our evolution across
the last decade to a much larger and more capable
organisation, while staying true to our heritage of
more than 135 years.
Across the Group, we have united behind our shared
Purpose to create value for all our stakeholders by
engineering a more efficient, safer and sustainable
future. I am so proud of our collective achievements,
grateful for all the support received and most
importantly, I’m extremely confident in the future
and sustainable success of Spirax Group.”
Nicholas Anderson
Group Chief Executive
16th January 2014 – 16th January 2024
See page 14 for a final word from Nicholas Anderson
...supports our bright future
2022
Launched the
Spirax Group
Education Fund
and Everyone is
Included
2021
Launched our
One Planet:
Engineering
with Purpose
Sustainability
Strategy
2022
Acquired
Vulcanic and
Durex Industries
2022
Launched
new-to-world
decarbonisation
solutions
2023
Investment
in Kyoto
Group
2024
Spirax-Sarco Engineering
becomes
Our Group has been built on strong foundations over
decades, creating an enviable culture based on our
Values. We are a caring, respectful and authentic
organisation with a shared Purpose that we
demonstrate every day through the way we work
together to make our difference.
We look forward to welcoming shareholders to our
AGM in May when we will share more information on
our brand refresh and ask for shareholder support to
change our legal name to Spirax Group plc.”
Nimesh Patel
Group Chief Executive Officer
Read more about who we are on pages 8 - 10
Engineering
our future
As a Company established during
the second industrial revolution,
anticipating and investing in our
future needs has become a core
part of our DNA.
There were lots of examples of this
during the last decade as we evolved
the scale and composition of our
Group by focusing on opportunities
to create significant value for all our
stakeholders and address the
imperative of climate change.
for over
135 years
Spirax Group is today represented by three strong
and aligned Businesses providing mission critical
thermal energy and fluid technology solutions to
industrial customers across a diverse range of sectors.
As Spirax Group we can help everyone better
understand who we are and how we work together
across our Businesses to help customers meet their
operational, sustainability and decarbonisation goals.
Throughout this report we share some of the ways
in which important decisions taken during the last
decade will continue to shape our long-term,
sustainable future.
Strategic Report
Summary
4
The industries we serve
6
8
Introducing Spirax Group
11 Chair’s Statement
14 Letter from the former Chief Executive
16 Case study: Empowering future
leaders
Investment case
18 Business model and approach
20
22 Chief Executive Officer’s Review
26 Stakeholder engagement
34 Key performance indicators
36 Financial Review
44 Ten-year financial summary
46 Operating Review
46
50
54
- Steam Thermal Solutions
- Electric Thermal Solutions
- Watson-Marlow Fluid Technology
Solutions
58 Case study: Developing solutions for
future customer needs
60 Sustainability Report
62
70
72
82
- Responsible business foundations
- One Planet at a glance
- Strategic initiatives
- Case study: Enabling future
generations
84
- TCFD & Climate-related Financial
Disclosure (CFD)
92
- Case study: The future of
sustainable steam
94
- Non-financial and sustainability
information statement
96
- Case study: Embedding
sustainability into our future
98 Risk Management
179 Regulatory disclosures
184 Statement of Directors’
Responsibilities
Governance Report
106 Our Governance
107 Board leadership and Company
Purpose
107 - Chair’s introduction
110 - Governance at a glance
112 - Board of Directors
114 - Our Group Executive Committee
115 - The Board at a glance
116 - Case study: Engineering our future,
together
118 - Board activities
121 - Section 172 Statement
124 - Division of responsibilities
125 - Governance framework
126 - Board composition, succession and
Financial Statements
186 Independent Auditor’s Report
195 Consolidated Statement of Financial
Position
196 Consolidated Income Statement
197 Consolidated Statement of
Comprehensive Income
198 Consolidated Statement of Changes
in Equity
199 Consolidated Statement of Cash
Flows
200 Notes to the Consolidated Financial
Statements
241 Appendix: Alternative performance
measures
249 Company Statement of Financial
evaluation
Position
128 - Colleague Engagement Committee
250 Company Statement of Changes in
Report
132 - Nomination Committee Report
138 Audit, risk and internal control
138 - Audit Committee Report
150 - Risk Management Committee Report
155 Remuneration
155 - Remuneration Committee Report
161 - At a glance summary: Executive
Directors’ remuneration
162 - Annual Report on Remuneration
175 - Summary Remuneration Policy
Equity
251 Notes to the Company Financial
Statements
Corporate Information
258 Our Global Operations
264 Officers and Advisers
Strategic Report
Summary
Financial, operational and
sustainability highlights
For the year ended 31st December 2023
Financial
• Revenues up 4% reflecting full-year
contribution from acquisitions; down
1% organically
ETS outperformed IP
• Integrations of acquisitions
• Early restructuring actions and cost
progressing well
containment partially mitigated
margin impact, particularly in H2
• Adjusted operating profit margin
reflects adverse mix impact of lower
volumes in higher margin businesses
• Statutory operating profit and
margin reflect impact of
restructuring and impairment costs
• Total dividend of 160.0 pence per
share, maintaining 56 year
track record
• Return to organic sales growth and
adjusted operating profit margin
progress expected in 2024
• Preserved investment to deliver
future growth:
• First installations of TargetZero
solutions
• Increased digital connections
enhancing our customer
propositions
• Expansion of Chromalox Ogden
manufacturing facility underway
• Investment in Kyoto Heatcube
adds to energy storage solutions
• Digital innovations in Watson-
Marlow support customers with
preventative maintenance
Operational
• Organic revenue growth in STS and
Sustainability
Good progress towards 2025 targets:
• Scope 1 and 2 emissions 6% lower
(45% lower than 2019 baseline)
• Group energy use 8% lower
• Group water consumption 20% lower
• 135 biodiversity projects completed
in 2023
• 36% of colleagues participated in
volunteering
• Recent appointments improving
gender balance of Executive Team
Our financial results in 2023 were impacted by a
more challenging trading environment than we
had anticipated at the start of the year, with a
number of external headwinds to our highest
margin businesses. An early focus on restructuring
to right-size capacity, together with cost
containment actions, supported our adjusted
operating profit margin. We are well positioned
to return to revenue and profit growth in 2024.”
Nimesh Patel
Group Chief Executive Officer
+
‘Sales’ is used interchangeably with ‘revenue’ when describing the financial performance of the business
++
‘STS’: Steam Thermal Solutions; ‘ETS’: Electric Thermal Solutions
+++ ‘IP’: Industrial Production growth
*
Organic measures are at constant currency and exclude contributions from acquisitions and disposals (with our Russian operating companies
treated as disposals from the date at which the Group suspended all trading with and within Russia)
**
‘Biopharm’ refers to Watson-Marlow sales to the Pharmaceutical & Biotechnology sector
See the Appendix to the Financial Statements for an explanation of alternative performance measures.
4
Spirax Group Annual Report 2023
Strategic Report Revenue £
£1,682.6m
KPI
Statutory operating profit £m
Adjusted operating profit* £m
KPI
Organic
Change %
£284.4m
Margin %
£349.1m
Margin %
2023
2022
2021
2020
2019
1,682.6
-1
2023
284.4
16.9
2023
349.1
20.7
1,610.6
1,344.5
1,193.4
1,242.4
+14
+17
-3
+6
2022
2021
2020
2019
318.8
19.8
2022
380.2
23.6
320.9
23.9
2021
340.3
249.0
245.0
20.9
2020
19.7
2019
270.4
282.7
25.3
22.7
22.8
All-workplace injury rate^
KPI
Statutory earnings per share p
Adjusted earnings per share* p
KPI
1.55
2023
2022
2021
2020
2019
249.5p
312.4p
1.55
1.75
2.22
2.62
3.44
2023
2022
2021
2020
2019
305.1
318.3
249.5
235.5
226.2
2023
2022
2021
2020
2019
312.4
377.2
338.9
256.6
265.7
^ Per 100,000 hours worked
See more on our KPIs pages 34–35
2023
2023
2023
23%
30%
2022
26%
43%
2022
25%
2022
Revenue by
segment %
54%
54%
Statutory operating
profit by segment %
55%
66%
39%
Adjusted operating
profit by segment* %
51%
59%
23%
16%
8%
2%
16%
10%
Before corporate expenses of £27.8 million.
Before corporate expenses of £27.8 million.
(2022: £39.1 million).
(2022: £25.8 million).
Steam Thermal Solutions
Electric Thermal Solutions
Watson-Marlow Fluid Technology Solutions
*
All adjusted profit measures exclude certain items, which totalled a charge of £64.7 million (2022: charge of £61.4 million), as set out in the
Appendix to the Financial Statements
The Group’s three operating segments, as defined by IFRS 8, are Steam Thermal Solutions, Electric Thermal Solutions and Watson-Marlow Fluid
Technology Solutions
Spirax Group Annual Report 2023
5
Strategic Report
The industries we serve
Solutions for a diverse
range of industries
We apply our products, solutions and expertise across a diverse range of industrial
sectors, helping our customers to increase their efficiency, safety and sustainability.
Food & Beverage
Pharmaceutical
& Biotechnology
OEM Machinery
20% of Group revenue
Steam is used for blanching, cooking,
baking, brewing, distilling, packaging,
cleaning and sterilising. Electric heating
elements are used in commercial food
equipment. Pumps are used to meter and
transfer ingredients, deliver food to process
lines and handle process waste.
18% of Group revenue
12% of Group revenue
Our peristaltic pumps, valves and single-use
components enable precise flow control and
fluid isolation. Clean steam reduces the risk
of product and process contamination.
Electrical heating is used in a wide range of
process heating applications.
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.
Oil & Gas
Chemicals
Power Generation
6% of Group revenue
Electrical heating products reduce fluid
viscosity, deliver freeze protection and
provide efficiency in the processing of
natural gas, crude oil and water. Our steam
products enable optimum steam system
performance and reduce energy use during
oil and gas production.
6% of Group revenue
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.
6% of Group revenue
Electrical heating 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 reuse waste heat formed
during the power generation process.
14% of Group revenues to ‘other’ industries including Pulp & Paper, Aerospace & Defence and Textiles.
6
Spirax Group Annual Report 2023
Strategic Report Our sector diversity supports our resilience
through economic cycles, see pages 18-21
Healthcare
Water & Wastewater
Buildings
4% of Group revenue
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.
3% of Group revenue
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
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.
Mining & Precious
Metal Processing
3% of Group revenue
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.
Semiconductor
Transport
3% of Group revenue
2% of Group revenue
Electrical products are used in water
manufacturing and printing production
processes to ensure thermal uniformity
which is critical during chip manufacturing
process; clean and pure steam generators
supply the humidification system to ensure
the air is not too dry or wet.
Electrical heating components provide
freeze protection and defrost for engines,
rotating equipment, mechanical systems and
fluid delivery. Lined hoses are used for
braking, cooling, transmission and steering
systems. Our steam heat exchange and
recovery solutions are used on cruise ships.
Spirax Group Annual Report 2023
7
Strategic Report Strategic Report
Introducing Spirax Group
Who we are
We are a leading thermal energy and
fluid technology solutions Group
Our expertise, products and solutions sit behind the production of
many consumables that people across the world rely on every day,
from food and drink to medicines.
A proud heritage and a bright future
We are 10,000 colleagues in every corner of the globe working
together in pursuit of our shared Purpose, united by and guided
by our core Values.
Our Purpose
To create sustainable value for all our stakeholders as we engineer a more efficient,
safer and sustainable world.
Our culture
An inclusive, equitable and wellbeing-focused culture makes us stronger as individuals,
as teams and as Spirax Group. It is central to the promises we make to our colleagues
and critical to achieving our Purpose.
Read more about our inclusive culture on page 64
Our Values
Safety
We care about
people, helping
them stay safe
and look after
their own
wellbeing.
Collaboration
We are most
successful when
we trust each
other and work
together.
Customer focus
Through our
expertise,
passion and
insight we
achieve
extraordinary
results for
customers.
Excellence
We approach
challenges with
passion, aiming
for excellence in
all we do, for a
sustainable
future.
Integrity
Success only
matters when
achieved fairly.
We believe that
winning with
integrity leads to
sustainable
results.
Respect
Everyone
matters, both
inside and
outside our
Company. We
respect everyone
we work with, as
well as the
natural
environment and
our local
communities.
8
Spirax Group Annual Report 2023
How we deliver
Solving customers’ problems is at the heart of our ‘total solutions’ approach.
Our thermal energy and fluid technology solutions improve operating
efficiency and safety in our customers’ critical industrial processes.
We deliver our solutions through three strong and aligned Businesses and their Divisions, that include
global and regional product brands.
At a glance
10,000
Colleagues
2,100
Sales and service engineers
66
Countries with a resident
direct sales presence
37
Manufacturing sites
1,700+
Core product lines
110,000
Direct buying customers1
1 Actively purchasing in the last 24 months.
Spirax Group Annual Report 2023
9
Strategic Report
Introducing Spirax Group continued
For people and planet
Operating sustainably and supporting our customers’ sustainability goals is at the
heart of our approach and enshrined in our One Planet Sustainability Strategy,
which is how how we aim to create value for people and our planet. We hold
ourselves to the highest standards and work with organisations that are aligned
with our ambition.
Read more in our Sustainability Report starting on page 60
Rated AA (leader)
Score 3.0 (above industry
average for E, S and G)
19.5 (low risk, top
rated company)
A- (climate change),
C (water)
10
Spirax Group Annual Report 2023
Strategic Report Chair’s Statement
A stronger, more balanced and
more sustainable Group that is
well positioned for the future
Decisions taken over the
last years have built strong
foundations, enabling Spirax
Group to serve and create
value for all its stakeholders.”
Jamie Pike
Chair
2023 has been a transitional year for the
business on a number of fronts. With respect
to trading, we have seen the transition to a
post-pandemic macroeconomic environment
impacting our business through customer
destocking in the Pharmaceutical & Biotechnology
and Semiconductor sectors, as well as a
challenging geopolitical landscape resulting in
higher inflation and low industrial production
growth. With respect to leadership, we have
successfully and smoothly made the transition
to a new Group Chief Executive Officer.
Spirax Group Annual Report 2023
11
Strategic Report Chair’s Statement continued
Against these transitions, there have also been many
constants, such as the fundamental strengths of our Group.
The quality of our products, criticality of our solutions and
the industry drivers towards more efficient, safer and more
sustainable production, are still the same. That is why the
Board’s confidence in Spirax Group’s long-term structural
growth opportunities, as well as in its people and culture,
are stronger than ever.
So, while 2023 has brought some very specific, short-term
headwinds, our focus has been on ensuring that we are
managing the business appropriately to position ourselves
for growth in 2024 as end markets recover. With this at the
forefront of our minds, the Board has remained committed
to ensuring the decisions we make create value for all our
stakeholders and the way in which we have engaged with
and taken stakeholder needs into account is outlined on
pages 121 to 123.
Board and leadership changes
In August, we announced that Nicholas (Nick) Anderson
would be standing down as Group Chief Executive and he
later retired from this role on 16th January 2024, precisely
ten years after his appointment and after 12 years with the
Company.
Nimesh Patel was appointed Group Chief Executive Officer
and took up the position on 16th January 2024. Nimesh
joined the Group in 2020 as Chief Financial Officer and his
appointment as Group Chief Executive Officer follows a
rigorous succession process, more details of which can be
found in the Nomination Committee Report on pages 132 to
137.
As announced in December 2023, Louisa Burdett will join
the Group in July 2024 as Chief Financial Officer (CFO).
Louisa is a highly experienced CFO having led finance
functions in several large companies including UK-listed
Croda, Meggitt and Victrex. She currently serves as a
Non-Executive Director and Audit Committee Chair of RS
Group plc.
Phil Scott, who joined the Group in 2021 as Director of
Group Finance, became Interim Chief Financial Officer on
16th January 2024 and will handover to Louisa shortly after
she joins the Group later this year.
In 2023, we had one change to our Non-Executive Board
members. Olivia Qiu stepped down as a Non-Executive
Director on 31st January and Constance Baroudel joined the
Board on 2nd August, bringing strong sustainability,
strategic and non-executive experience.
Biographies of the Board members can be found on pages
112 and 113.
This is my final year as Chair of Spirax Group, following ten
years on the Board. The Nomination Committee is currently
engaged in the search and appointment of my successor
and I will stand for re-election at the Company’s AGM in May
in order to support the management team, and to provide an
appropriate handover to the incoming Chair. I expect to have
stepped down from the Board before I take up the position
of Chair of IMI plc in January 2025. Further information on
this can be found in the Nomination Committee and
Directors’ Reports on pages 134 and 180.
It has been an honour and a privilege to be part of this
Group’s journey over the last decade. The decisions taken
over the last years have built strong foundations, enabling
12
Spirax Group Annual Report 2023
Spirax Group to serve and create value for all its
stakeholders. I have no doubt the Group will continue to
prosper under Nimesh’s leadership.
Our commitment to inclusion, equity and diversity
Our Board is diverse ethnically, culturally and in terms of
gender, bringing value to our Group.
At the end of December 2023, the Board met the 40% FTSE
Women Leaders Review target for female representation
and with two members of the Board coming from a minority
ethnic background, we exceeded the Parker Review target
of at least one individual.
Board highlights
The Board met seven times in 2023. We spent a significant
proportion of our time on talent reviews and leadership
succession, including managing the Group Chief Executive
succession process which led to another key succession
process for the CFO role.
In what was a challenging year, the Board supported
management in its decision-making around necessary
restructuring activities, which were executed in line with our
core Values and having first given due consideration to the
impacts of the decision-making outcomes on all stakeholders.
During the year we also reviewed and approved major
investments to support the Group’s growth, including the
decision to invest US$58 million in expanding Chromalox’s
manufacturing facility in Ogden (Utah, USA), which is
fundamental to the supply of Medium Voltage heating
solutions that are critical to our decarbonisation products
and solutions.
We have continued to focus on ESG activity, including
receiving regular updates on Health & Safety as well as
Colleague Engagement activities both through the
Colleague Engagement Survey and the work of the
Colleague Engagement Committee. In addition to reviewing
the One Planet Sustainability Strategy, we received
regular updates to monitor progress against targets and
reviewed the Group’s TCFD disclosures.
The Board travelled and visited operations in France
(Thermocoax, ETS), the USA (Watson-Marlow), and UK
(Spirax Sarco, STS), meeting the local leadership teams and
our colleagues across sales, manufacturing and in
supporting functional roles.
During the year we have closely monitored the proposed
changes to the UK Corporate Governance Code, particularly
those which have been clarified in the FRC guidance
released in January 2024.
We have worked closely with management to support the
Group’s internal controls improvement ‘G3’ Project that aims
to systematically improve and standardise controls across
the Group using a risk-based framework. This workstream
has been supported with additional investment into our
Governance teams and supporting infrastructure.
The Board has overseen additional investment into the
Group’s IT infrastructure with a particular focus on
assessing and improving our Cyber Security preparedness.
This has included evaluating the key learnings from a
ransomware simulation exercise undertaken by
management.
Strategic Report Board highlights continued
As part of the review of the Group IT and systems
infrastructure, the Board approved the decision to redesign
the existing ERP upgrade programme, Project OPAL, within
Steam Thermal Solutions (STS). This resulted in an
impairment charge. Over time the scope of Project OPAL
had expanded substantially to include a wider range of
business applications. In parallel, the external technology
market has continued to evolve, and the Board supported
the move to implement consistent ERP solutions across all
three Businesses. Within STS, this will enhance future
capability, in addition to leveraging the scale of the broader
Group.
The Group’s IT infrastructure is an important foundation for
our Digital evolution. The Board engaged regularly
throughout 2023 on delivery of our Digital ambition, to
understand how the Businesses are advancing projects
which aim to deliver connected insights to our customers,
further enhancing our solutions.
You can read more about the Board’s decision making in
support of all our stakeholders on page 123.
Board effectiveness
Following the external and independently facilitated Board
evaluation in 2021, the Board conducted internal Board
evaluations in 2022 and 2023. Full details of the 2023
evaluation process and outcomes can be found in
Nomination Committee Report on page 134 and 180.
Dividends
The Directors are proposing the payment of a final dividend
of 114.0 pence per share (2022: 109.5 pence). Subject to
approval of the final dividend by shareholders at the Annual
General Meeting on Wednesday 15th May 2024, the total
Ordinary dividend for the year will be 160.0 pence per share,
an increase 5% over the Ordinary dividend of 152.0 pence
per share for the prior year.
Dividend per share p
160.0p
2023
2022
2021
2020
2019
160.0
152.0
136.0
118.0
110.0
Jamie Pike
Chair
on behalf of the Board of Directors
6th March 2024
Leading with Purpose
Across this Annual Report we
have recorded some of the
significant decisions and
outcomes that have shaped our
trajectory over the last decade,
under the stewardship of Nick
Anderson, who took up the role
of Group Chief Executive on 16th
January 2014 and retired
precisely ten years later.
Nick leaves behind a larger, more
complex, more capable and sustainable
Company which has grown to become
home to three strong and aligned
solutions-focused Businesses.
Under Nick’s tenure, the Company has
evolved, through investment,
acquisitions and by aligning as One
Group - now Spirax Group - with a
common Purpose, business model and
shared core Values that underpin our
differentiated culture.
Nick leaves the Group well positioned
and in safe hands, with the appointment
of Nimesh as a strong successor from
within the Group, supported by a very
capable leadership team.
On behalf of the Board, I thank Nick
for everything he has done and wish
him well in the next phase of his
Non-Executive career.
Section 172 Statement
In accordance with the Companies
(Miscellaneous Reporting) Regulations 2018, the
Directors have prepared a statement describing
how they have had regard to the matters set out
in Section 172 when performing their duty to
promote the success of the Company. This can
be found on pages 121 to 123.
See pages 121 - 123
Spirax Group Annual Report 2023
13
Strategic Report Letter from former Chief Executive Nicholas Anderson
A final word from
Nicholas Anderson
Our journey over the last ten years
has been thrilling and inspiring.”
Dear Shareholders
After joining the Company in 2012, my retirement on 16th
January 2024 was precisely ten years to the day since
taking up the mantle of Group Chief Executive of Spirax-
Sarco Engineering, now Spirax Group.
As I reflect on my 12 years here, I look back with immense
pride on what we have achieved collectively. I am also full of
gratitude for the support and encouragement I have always
received from all stakeholders throughout this journey.
Spirax Group is today a larger and stronger Group
comprised of three aligned, solution-focused Businesses
and represents everything that has been made possible
by the evolution of Spirax-Sarco Engineering over the past
decade. This was achieved through our investments in
growth and infrastructure: expanding our direct sales
capabilities and addressable markets, increasing our
geographic and manufacturing footprint, developing new
technologies, focusing on sustainability and enhancing our
organisation, while constantly investing in the growth and
wellbeing of colleagues all around the world.
In 2014, I became the leader of a very successful Company
with a long and proud history, full of capable people doing
brilliant things to transform the efficiency, safety and
sustainability of industrial customers’ mission-critical
processes. I made it my mission then to be a respectful
custodian of the legacy entrusted to me and to make sure
that my leadership decisions would ultimately leave the
Company in an even better standing.
In 2024, I am gratified to have extended that long and
successful history, leaving behind a Group with more than
double the number of even more capable people and with
three great solution-focused Businesses that have even
more opportunities to grow and prosper. We have also
focused on fulfilling our commitments to sustainability,
inclusion, community engagement, innovation, operational
excellence and, importantly, preserving a very special
culture based on our Values.
Handing over the baton of leadership to Nimesh was the
final step in a long-planned and carefully managed
transition. I have every confidence that Nimesh and the
Group Executive Committee, supported by our worldwide
colleagues, will take Spirax Group to even greater heights
and I wish them every success in this endeavour.
From my perspective, our journey together over the last ten
years has been thrilling and inspiring. It has been an honour
to lead the organisation to this point and I will watch with
pride and keen interest, as the Group continues on the next
phase of its journey.
There is no doubt in my mind that Spirax Group has a very
bright future ahead.
Thank you for your support.
Nicholas John Anderson
Group Chief Executive
16th January 2014 – 16th January 2024
14
Spirax Group Annual Report 2023
Strategic Report Spirax Group Annual Report 2023
15
Strategic Report Our colleagues
Empowering
future leaders
Developing our talent
for the future
Global Graduate Leadership
Development Programme
Every leader will remember when they
embarked on their careers how those
early experiences and learning shaped
the skills they would go on to acquire for
their future career. The world of work
today is very different to how it was ten
years ago, and so one way that we
continue to engineer our future is by
helping to develop the next generation of
leaders, equipping them with the skills
and experiences to lead effectively in the
decades to come.
Our two-year Global Graduate Development
Programme was launched in 2017 and
became the Global Graduate Leadership
Development Programme in 2023. The
programme built upon its early UK
foundations to focus on developing future
leaders from across Spirax Group in
commercial, manufacturing and supply roles.
Each graduate follows a consistent and
structured development programme
through a combination of online and
Group learning activities. The programme
is tailored to the graduate’s interests and
future career goals through the
undertaking of three placement rotations,
each with a common set of objectives but
giving insights into different parts of the
Group and its operations, including an
overseas placement.
This allows them to see another part
of the world, immerse themselves in a
different culture and collaborate with
colleagues from across the globe. In this
way, our Global Graduate Leadership
Development Programme supports
our Inclusion Commitments, as we believe
that having a diversity of skills,
experience and perspectives in our Group
is important today and for the future.
16
Spirax Group Annual Report 2023
Number of graduate alumni since
2017
84
Gender split since 2017
50:50
Representation from minority
ethnic backgrounds in UK and USA
in 2023
33%
Strategic Report Kiranjit’s graduate journey
Kiranjit Dharni joined Steam Thermal Solutions,
a Spirax Group Business, on the Global Graduate
Development Programme in 2019, completing
project placements in Supply, Business
Development, Group Finance and our Spirax
Sarco operating company in Sweden. Kiranjit
then took the role of Business Development
Manager for Spirax Sarco in the Nordics, where
she was involved in implementing many areas of
the Customer first2 Strategy including Digital
pilots and steam system audit capability.
As of February this year, Kiranjit is Programme
Manager for Gestra, supporting the implementation
of our Customer first2 Strategy by driving and
executing key initiatives for Gestra globally.
I really felt my learning was enhanced
through the graduate programme, from
being able to contribute to solutions
for real world problems through high
profile, challenging projects which often
involved senior leadership exposure, to
learning about my strengths and what
I enjoy doing. It was a privilege to be
a part of.”
Kiranjit Dharni
Programme Manager,
Gestra, part of Steam Thermal Solutions
Spirax Group Annual Report 2023
17
Strategic Report Making our difference through our One Group approach
Business model and approach
Our One Group approach
What we do
At Spirax Group, our customers’ needs
drive all that we do and to meet their
needs effectively, we leverage our
culture, strategic framework and
business model to inform the way we
work and deliver our Purpose.
Our
colleagues
Our
customers
Purpose
Culture
Our
shareholders
Our
communities
Business
model
Strategy
Our
suppliers
Our
environment
Our Purpose is to create sustainable value for all
our stakeholders as we engineer a more efficient,
safer and sustainable world.
In living our Purpose, our Group is united by a strong
culture, a common strategic framework with six
strategic priorities, and a consistent business model
which enables us to create outcomes with lasting
impact for all our stakeholders across a breadth of
geographies and diverse end market sectors.
Read more about how the Group has engaged with
stakeholders this year on pages 26–33
Read more about how the Board has engaged with
stakeholders this year on pages 121–123
Our culture
An inclusive, equitable and wellbeing-focused culture
makes us stronger as individuals, as teams and as
Spirax Group. It is central to the promises we make to
our colleagues and critical to achieving our Purpose.
Read more on pages 64–66
18
Spirax Group Annual Report 2023
Our core activities are those things we
do that enable us to meet the needs of
our customers and achieve our
Company Purpose.
1,700+
core product lines
Innovate and design
Through innovative research and
development (R&D) and collaboration
across our Group, we develop and
enhance our already broad range of
products, pre-fabricated packages
and site services, ensuring that we
meet customers’ changing needs.
Manufacture
We manufacture industrial and
commercial steam system products,
electrical process heating and
temperature management products
and peristaltic and niche pumps and
associated fluid path technologies.
37
manufacturing
sites
Sell
With a resident direct sales presence
in 66 countries and non-resident
direct sales or distributors in a further
98 countries, we serve customers in
164 countries worldwide.
66
countries with
direct sales
presence
Monitor and measure
We offer a comprehensive range of
site audits, maintenance services
and digital monitoring solutions, to
keep our customers’ systems
operating efficiently.
45%
revenue from
maintenance
activities
Apply and solve
We combine our specialist knowledge
and digital capabilities with our
industry-leading products and
services to deliver value-adding
engineered solutions to customers,
who increasingly rely on our service,
solutions and expertise.
2,100
sales and service
engineers
Educate
We help our customers to identify
in-house engineering knowledge
skill gaps and offer a wide range of
training courses.
61
training centres
Strategic Report Our customer focus
Our routes to market
At the heart of our
value creation is our
deep engagement with
and understanding of
our customers and their
processes.
Our direct sales approach plays an important role in all routes to market –
whether direct or indirect – as our engineers engage with end users to
demonstrate the benefits of our products, solutions and services.
Direct sales channels
Indirect sales
channels
Customer
Closeness
Applied
Engineering
Customer
Needs
Regional
Manu-
facturing
Wide
Product
Range
Customer closeness
Through sectorisation and
building deep, long-term, direct
relationships with our customers
we help them address their
unrecognised needs.
Applied engineering
Providing value to customers
through the application of our
extensive knowledge of systems
design, operations and
maintenance.
Wide product range
The breadth of our product
offering is unmatched by our
competitors and we are
committed to R&D.
Regional manufacturing
Strategically located
manufacturing plants provide
local availability of a wide range
of products whilst meeting
applicable regional design codes.
78%
22%
End users
Original
Equipment
Manufacturers
Contractors
and
consultants
Distributors
and
resellers
42%
26%
10%
22%
End users of our products and services
Industrial and commercial steam, electrical process heating and peristaltic and niche pump
users, across a wide range of markets, purchasing from us directly, specifying our
products, or buying from distributors.
How we generate revenue
85% of Group revenue is generated from annual maintenance and
operational budgets and 40% of Group revenue is self-generated.
15%
Capex
budgets
40%
Maintenance and repair sales
Typical invoice value £1.5k
Opex
budgets
45%
Small project sales
Typical invoice value £10-70k
Large project sales
Typical invoice value >£100k
Read more about the industries
we serve on pages 6–7
Spirax Group Annual Report 2023
19
Strategic Report Engineering sustainable growth
Investment case
Our key strengths
Diverse yet balanced end markets
• Leading positions in large but niche markets
• Range of high-growth as well as defensive
and resilient end markets
• Global footprint
Driving further growth
• Operating leverage enables reinvestment to drive
organic growth
• Highly selective bolt-on M&A to enhance capabilities
and drive further growth
Ten years of total addressable market (TAM) growth
2013
Watson-Marlow
(£130m) market share 18%
Niche pumps
market £0.7bn
Steam Thermal Solutions
(£559m) market share 14%
Steam Thermal Solutions
market £3.9bn
TAM
£4.6bn
Sales
£0.7bn
2023
Watson-Marlow
(£394m) market share 13%
Niche pumps
and associated
equipment
market £3.2bn
Electric Thermal
Solutions (£379m)
market share 9%
Electrical Thermal
Solutions
market £4.0bn
Steam Thermal
Solutions market
£5.2bn
TAM
£12.5bn
Sales
£1.7bn
Steam Thermal Solutions
(£910m) market share 17%
Steam Thermal Solutions market
Electric Thermal Solutions market
Watson-Marlow Fluid Technology Solutions market
Source: Based on internal estimates
Delivering long-term compounding growth
Long-term compounding growth with attractive margins
Critical products supporting customers’ critical processes
Strong financial track record
Leading player in
fragmented niche
markets
Unique direct sales
model and strong
customer insight
Self-generated
growth with pricing
based on customer
economics
Organic growth
> 2 x IP
Attractive
stable margins
Sales funded from
Opex budgets
with low average
invoice size
Resilience driven by
geographic, sector
and customer
diversity
Growing addressable
market with
decarbonisation a
key long-term driver
Strong cash
generation
Earnings and
dividend growth
Delivering long-term compounding growth
20
Spirax Group Annual Report 2023
Strategic Report Sustainable returns
Outperforming industrial production growth
Average outperformance vs IP >2x
Organic growth
Global IP (CHR)
2004
2005
2006
2007
2008
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2021
2022
2009
2020
2023
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
Strong profit growth and consistent margin expansion
Average Margin 2014 – 2023: 23.1%
Average Margin 2004 – 2013: 18.2%
28.0%
26.0%
24.0%
22.0%
20.0%
18.0%
16.0%
14.0%
12.0%
10.0%
Group Adjusted
Operating Profit
Margin (%)
Group Adjusted
Operating Profit
(£m)
400
350
300
250
200
150
100
50
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Our strategic priorities
The following six strategic priorities guide our focus to deliver self-generated growth that outperforms our markets.
Increase direct sales
effectiveness through
market sector focus
Broaden our
global presence
Optimise our supply
chain effectiveness
Develop the knowledge
and skills of our expert
sales and service teams
Leverage our R&D
investments
Operate sustainably and
help improve our customers’
sustainability
Spirax Group Annual Report 2023
21
Strategic Report
Chief Executive Officer’s Review
Well positioned to return to
revenue and profit growth
in 2024
It is a privilege to lead
Spirax Group, working
alongside outstanding
people to build on our
strengths and support
future growth.”
Nimesh Patel
Group Chief Executive Officer
I took over as Group Chief Executive Officer of
Spirax-Sarco Engineering (now rebranded
Spirax Group) on 16th January 2024, following
Nick Anderson’s retirement. Over the past ten
years, under Nick’s leadership, we have
established strong positions in what are now
three very significant Businesses with exciting
future potential.
I am grateful to Nick for bringing me into the
Group and for laying the strong foundations
that will support our journey in the years to
come. I feel privileged to be leading Spirax
Group and would like to thank the Board for
supporting me and my Group Executive
Committee (GEC) colleagues through this
leadership transition.
22
Spirax Group Annual Report 2023
Strategic Report Summary of 2023 performance
The macroeconomic environment was materially weaker in
2023. Global industrial production growth (IP) was 0.3%
compared to 2.1% in 2022, with lower growth in all regions.
IP was materially lower than the 1.4% that had been forecast
at the beginning of the year with downward revisions to
second half growth particularly marked in North America
and China. The Group was also impacted by external
demand challenges in our Biopharm and Semiconductor
(Semicon1) sectors (which accounted for approximately 16%
and 4% of 2022 proforma2 sales respectively), due to
customer destocking.
Against this backdrop, the Group’s financial performance in
2023 was in line with the expectations we set out in our
November 2023 trading update.
We saw strong demand during the first half in STS and the
industrial process focused Divisions of ETS (Chromalox and
Vulcanic). However, demand from industrial equipment
customers of ETS was lower, particularly in Semicon,
impacting Durex Industries and to a lesser extent,
Thermocoax. Demand in Watson-Marlow was also weak,
driven by Biopharm customers destocking post the COVID
pandemic. As a result, Group sales grew organically by 2%
in the first half, reflecting strong growth in STS (15%) and
ETS (7%) offset by a decline in Watson-Marlow (21%).
In the second half, the macroeconomic backdrop weakened
for STS and the industrial process focused Divisions of ETS,
while Biopharm demand remained subdued and Semicon
demand was lower than in the first half. Group sales
declined organically by 4% in the second half, reflecting
slower growth in STS (2%) and declines in ETS (2%) and
Watson-Marlow (17%).
Group revenues in 2023 declined by 1% organically
compared to 2022 (down 1.5% compared to proforma 2022
sales), to £1,682.6 million. Sales benefited from a full year’s
contribution from the Vulcanic and Durex Industries
acquisitions but were also impacted by a currency headwind
of 2% and a small adverse impact from the disposal of our
Russian operations in 2022. Lower sales in our highest
margin businesses impacted full year adjusted operating
profit, which was down 12% organically to £349.1 million,
with full year adjusted operating profit margin down by 270
bps, organically, to 20.7%. This outcome reflects our strong
pricing discipline, which helped to partially mitigate the
impact of lower volumes and adverse sales mix on our
margin, even as cost inflationary pressures eased.
Recognising the challenging trading environment, we took
early action across all three Businesses to appropriately
right-size capacity and overhead support costs as well as
implementing temporary cost containment actions and
reducing variable compensation across the Group. As a
result of these actions, Group adjusted operating profit in
the second half grew by 3% compared to the first half,
despite sales being lower. We protected our ability to
respond to an anticipated recovery in demand by continuing
to invest in a number of strategic initiatives that underpin
the Group’s long-term growth. I am grateful to my
colleagues around the world for their commitment,
expertise and efforts, as well as their continued focus on
delivery for all stakeholders, during these more challenging
times.
The Board has declared a final dividend of 114.0 pence
(2022: 109.5 pence) per ordinary share, bringing the total
dividend for the year to 160.0 pence. The total dividend for
2023 represents 5% growth compared to 2022, reflecting
our confidence in the Group’s business model, strategy and
medium to long-term prospects extending our track record
of dividend progress to 56 years.
Market environment
Global industrial production growth (IP) in 2023 was 0.3%
compared to 2.1% in 2022, with lower growth in all regions.
IP was also materially lower than had been forecast at the
beginning of the year (1.4%) with downward revisions to
second half growth particularly marked in North America
and China. China’s IP was expected to grow by 2.1% as it
recovered from the weak 1.4% in 2022; instead, it grew by
only 0.6% in 2023. Global IP fell sequentially in Q4 by 0.3%
compared to Q3, despite a October 2023 forecast for
sequential growth of 0.7%, evidencing the weakening
outlook for industrial production heading into 2024.
In Biopharm (around 50% of Watson-Marlow’s sales in 2023,
down from around 60% in 2022), customer destocking,
which began in the second half of 2022, continued and the
recovery in demand that we had anticipated in the second
half of 2023 did not materialise. During the second half of
2023, our customers began to indicate higher excess
inventory levels than they had originally estimated, with a
return to demand growth not expected until late 2024.
Despite the challenges associated with forecasting short-
term demand, the Biopharm end-markets remain robust and
we believe that the underlying growth in demand has
continued at its pre-pandemic rate of over 10% per annum.
Industrial Production growth (IP)
Europe
North America
South America
Asia ex-China
China
Global
H1
-0.1%
0.7%
-1.1%
-0.6%
0.8%
0.0%
2023
H2
0.2%
0.4%
-1.6%
1.8%
0.5%
0.6%
FY
0.0%
0.5%
-1.4%
0.6%
0.6%
0.3%
2022
H2
0.6%
2.8%
1.3%
1.6%
2.3%
1.7%
H1
2.2%
4.0%
1.9%
4.0%
0.5%
2.5%
FY
1.4%
3.4%
1.6%
2.8%
1.4%
2.1%
Source: CHR 26th February 2024
1 Semicon refers to the Semiconductor Wafer Fabrication Sector
2 Proforma comparisons include contributions from Vulcanic and Durex Industries, as if they had been fully owned by the Group throughout 2022
Spirax Group Annual Report 2023
23
Strategic Report Chief Executive Officer’s Review continued
Market environment continued
In Semicon (around 11% of ETS sales in 2023, down from
around 18% of proforma 2022 sales), demand in the first half
was lower than we had anticipated and remained subdued
through the second half, with our customers indicating a
return to growth in 2024. Over the medium-term, Semicon
remains an attractive and growing sector. We continue to
anticipate strong demand for our niche solutions for precise
thermal controls that are incorporated by Original
Equipment Manufacturers (OEMs) into Wafer Fabrication
Equipment (WFE) utilised in ultra-critical applications.
Other strategic sectors such as Food & Beverage, Oil & Gas
and Power Generation proved resilient during 2023, while
decarbonisation through electrification remains a growing
strategic imperative for customers, reflected in the strong
demand we have seen for our products and solutions in
Chromalox and Vulcanic.
Strategic progress
Health and Safety#
As a result of our continued focus on Health and Safety
(H&S) improvement, our all-workplace incident rate
(excluding acquisitions) reduced by 11% to 1.55* in 2023.
The Group (excluding acquisitions) Lost Time Accidents
(LTA) rate increased to 0.19* from 0.12* in 2022. The
increase is in part attributable to our strengthened focus
on monitoring and reporting. We have also introduced a
category of Serious Lost Time Accidents (SLTA) and, while
this increased from 7 to 8 in 2023, the rate remains low at
0.05%*.
Improving safety standards and processes in our most
recent acquisitions, Vulcanic and Durex Industries, remains
a key priority as we integrate these businesses into ETS.
The all-workplace incident rate, LTA and SLTA rates of the
two businesses in 2023 (7.55*, 1.32* and 0.47* respectively)
reflect the lower priority that was given to measurement and
processes around H&S under previous ownership. Both
Vulcanic and Durex Industries have embraced our strong
H&S focus, allowing us to build an active improvement
programme.
In 2023, we introduced a five-year Group Safety Excellence
Framework across all three Businesses. The framework aims
to establish consistent oversight, align standards and
reduce risk across all our operating companies globally, as
well as evolving our H&S culture. Material areas of progress
in 2023 included completion of an inventory and risk
assessment of all machinery and expanding the compulsory
personal protective equipment protocols. In 2024, we will
conduct a global survey to better understand our H&S
culture, complete a baseline of statutory inspections and
introduce training to help our colleagues complete root
cause analysis. In addition, as part of our commitment to
continuous improvement, we have also commissioned an
independent review of our approach to H&S.
Expanding our addressable market
All three Group Businesses have continued to develop new
solutions, supporting our direct sales engineers to drive
growth in target sectors.
STS developed a new Customer Value Proposition to
support lithium mining and the related electric vehicle
battery sector, helping to expand our addressable market.
Following commercial launch of the Group’s ‘TargetZero’
solutions, STS has begun to build a pipeline of long-term
opportunities amongst its extensive global customer base.
Sales in 2023 included the ‘ElectroFit’ (a retrofit electric
thermal solution to replace gas fired burners in steam
generating boilers) installation at a Diageo site in Turkey
(with a second to follow in 2024); a first fit ‘SteamVolt’
(electric boiler solution developed in partnership with our
boiler OEM customers) installation for a global Food &
Beverage customer in Argentina; and several UK
installations of the ‘Steam Battery’ (a storage solution for
steam that can be generated by renewable energy or when
electricity costs are at their lowest).
In ETS, Chromalox and Vulcanic have also continued to
develop their decarbonisation project pipelines and drive
penetration of Medium Voltage technology.
Watson-Marlow successfully transformed its operating
model in the mining sector in Australia from a distributor-led
approach to direct sales, helping to build customer
proximity and strengthen its competitive advantage.
Watson-Marlow also launched an important high flowrate
range extension for its Qdos pump, targeting the industrial
liquid/solid separation market which is an attractive new
area of growth.
We also continued to make progress in implementing our
digital strategy with an acceleration in the number of STS
operating locations and customers that are digitally
connected through the Cotopaxi platform, to support
solution generation. Watson-Marlow has developed a
number of machine-learning protocols aimed at delivering
preventative maintenance benefits which will shortly be
piloted in a number of sites within the mining sector.
Optimising supply chain effectiveness
Across the Group, we measure customer service levels
using a number of metrics including on-time-to-request
(OTTR). STS notably achieved a material improvement in its
2023 OTTR performance that had been impacted by supply
chain challenges during 2022.
Watson-Marlow established a five-step process to drive
operational excellence and efficiencies across its supply
sites by delivering ongoing improvements in safety,
productivity and procurement practices.
In October, ETS began construction of an expansion to
Chromalox’s manufacturing site in Ogden, Utah (USA),
which will be dedicated to Medium Voltage heating
solutions. The US$58 million project is expected to be
completed towards the end of 2024, with production
ramping-up in 2025.
# We recognise the need to improve safety performance in our recent acquisitions. Therefore, Group data excludes acquisitions data,
which is reported separately
* Per 100,000 work hours
24
Spirax Group Annual Report 2023
Strategic Report Group Executive Committee membership
For the majority of 2023, the Group Executive Committee
(GEC) comprised the Managing Directors of our three
Businesses, as well as key functional leaders across
Finance, HR, Sustainability and Legal. In September 2023,
we expanded GEC with the appointment of Maria Wilson,
Group Digital Director. Phil Scott joined the GEC in January
2024, following his appointment as Interim Chief Financial
Officer (CFO). In the summer, we will be joined by Louisa
Burdett, who was appointed CFO in December 2023, and
Céline Barroche who takes over as Group General Counsel
and Company Secretary, succeeding Andy Robson who is
retiring from the Group later this year. I’m delighted to have
such a strong, capable and diverse leadership team.
Signed by:
Nimesh Patel
Group Chief Executive Officer
on behalf of the Board of Directors
6th March 2024
Operating sustainably
The Group (excluding acquisitions) continued to improve its
sustainability footprint. Energy usage was down by 8%
compared to 2022, which supported a reduction of 6% in
our absolute scope 1 and 2 market-based greenhouse gas
emissions compared to 2022. To date we have achieved a
45% reduction against our 2019 baseline and are on track to
achieve our targeted reduction of 50% by 2025. We now
have green energy contracts in place for over 60% of the
Group’s electricity usage and made further progress in
implementing Project ClearSky which will materially
decarbonise the STS manufacturing facility in Cheltenham
(UK).
Water consumption has also reduced across the Group,
down by 20% compared to 2022. Building on the momentum
of 78 biodiversity projects completed in 2022, a further 135
biodiversity projects were completed in 2023. An area
where we recognise the need to make additional progress is
reducing the Group’s total waste sent to landfill, which
remained at 10% in 2023, with additional resource added in
this area to help deliver our target of 0% waste to landfill by
2025. Volunteering and community engagement are key
elements of our One Planet Sustainability Strategy and
3,280 colleagues participated in volunteering activities (36%
of the total number of colleagues), with the hours
contributed rising by 13% compared to 2022.
Our Sustainability Strategy is being deployed within
Vulcanic and Durex Industries.
Acquisitions and Disposals
During the year we continued to focus on the onboarding of
Vulcanic and Durex Industries into ETS and the wider Group.
Our acquisition strategy is built around developing our suite
of products and solutions with new and enhanced
capabilities together with broadening our global presence.
In July, we completed the acquisition of a 15% stake in Kyoto
Group (Euronext ticker: KYOTO) as part of a strategic
investment agreement alongside Iberdrola (IBE ticker:
Iberdrola S.A.) to accelerate the decarbonisation of
industrial process heat with Kyoto’s proprietary ‘Heatcube’,
a molten salt thermal energy storage solution. Through
Vulcanic, we have been working with Kyoto since 2021 to
provide the electric immersion heater and power control
systems of ‘Heatcube’. Our investment and partnership will
support the commercial and technological development of
electrical heaters for existing and future generations of
‘Heatcube’ and help drive market adoption.
In August 2023, Gestra (part of STS) acquired a small
distributor in Malaysia, with whom they have worked closely
in the past, to enhance our local presence and engineering
capability to develop tailored solutions for the local
customer base.
Further details of the operational progress made by each
Business are set out in the Operating Review.
Spirax Group Annual Report 2023
25
Strategic Report Strategic Report
Strategic Report
Stakeholder engagement
Engineering our future
for all stakeholders
26
Spirax Group Annual Report 2023
Strategic Report Our Purpose guides us to operate in a way that
aims to deliver long-term sustainable value for
our six stakeholder groups. To do this, we listen
and then take decisions in line with our Values
to support our colleagues, customers, local
communities, the environment, suppliers and
shareholders equally.
Across Spirax Group, we aim to create a
positive impact in everything that we do by
managing our resources thoughtfully,
mitigating our risks and capitalising on the
opportunities we see by implementing our
strategy for growth.
This section forms part of our Section 172 statement.
Board engagement can be found on page 121
Key decisions over the year on page 111
Our shareholders
Read about how we are creating
long-term value for all our
shareholders on pages 20-21
Discover how we are improving
financial controls for a more resilient
future on pages 116-117
Our suppliers
Find out how we are are working with
suppliers to help raise the standards
in our supply chain and support them
on their sustainability journey on
pages 80 and 96-97
Learn about how our three
Businesses are optimising supply
chain effectiveness on pages 46-57
Our colleagues
Find out more about how the Board
has engaged with colleagues
throughout 2023 on pages 128-131
Read about how we are developing
talent for the future on pages 16-17
Our communities
Learn more about how we are
removing barriers to improve equitable
access to education in our local
communities on pages 82-83
Read about how we are supporting our
communities around the world through
our Giving today for a better tomorrow
community engagement programme
on page 81
Our customers
Find out more about how our
Businesses are responding to
customer demand on pages 46-57
Discover how we are adopting
technologies such as artificial
intelligence (AI) to deliver digital
insights on page 58
Our environment
Learn about the changes we are
making in our own operations to
deliver environmental
improvements on pages 72-78
Discover how our new-to-world
‘TargetZero’ solutions are helping
us to decarbonise our
manufacturing facilities on pages
92-93
Spirax Group Annual Report 2023
27
Strategic Report Stakeholder engagement continued
Our colleagues
Why they are important
The knowledge and expertise of our colleagues, aligned
to our Purpose, Values-based culture and business model,
is core to how we work at Spirax Group. Colleagues often do
their best work when they feel valued and included.
Diversity in our global teams brings a wide variety of
perspectives and leads to stronger and better decision
making. Therefore, our ability to attract and retain diverse
talent is important for sustainable growth and success.
What matters to them
Colleagues want to work in a culture where they can be
themselves, feel they belong, are supported to be at their
best and encouraged to make a difference for others as well
as our planet. They want to achieve better balance in their
work and personal lives, while pursuing opportunities for
development and to be fairly rewarded and recognised for
their contributions.
How we engaged
• Colleague engagement survey which received
90% participation*
• Colleague engagement forums, including with the Board
• Senior Leader Webinars
• Business and topic specific town hall meetings
What we learnt
• Our inclusion metrics improved on 2021 by five percent*
globally as a result of launching our Group Inclusion plan,
Everyone is Included in 2022
• The survey told us that colleagues feel positive about
being supported to help their local communities (up ten
percent* on 2021) through the launch of our Spirax Group
Education Fund
• And colleagues are also positive about being supported to
be more environmentally responsible (83%* favourable)
through our One Planet Sustainability Strategy
Outcomes
• Brought forward pay review from March to January 2023
and applied market-leading pay increases globally in
response to significant inflationary pressures
• Held our first Spirit Awards Ceremony, recognising
colleagues for living our Values
• Launched One Place (colleague engagement platform
and SPARK (global learning and development platform)
* Excluding results from our colleagues in businesses acquired in 2022
28
Spirax Group Annual Report 2023
I am proud to have been able to
represent one of the Group’s Values
and to have won a Spirit Award in
the programme’s inaugural year. This
experience will remain etched in
my memory.”
Ouardia Djaroun
ADST-S Workshop Manager, Thermocoax,
Electric Thermal Solutions
• Global Wellbeing Day – an additional day of paid leave for
all colleagues in 2023
• Rolled out our Group Inclusions Commitments to
colleagues joining us from Vulcanic and Durex Industries
(acquired in Q4 2022)
• Invested further in our Colleague Engagement and
Communications capability
Strategic Report Our customers
Why they are important
Spirax Group has three strong and aligned Businesses that
provide mission critical solutions to our customers across
their thermal energy and fluid path technology processes.
To provide more efficient, safer and sustainable outcomes
for our customers through solving their operational
challenges, we must first understand their unique and
evolving needs.
What matters to them
Customers want trusted product quality combined with
local knowledge, insights, expertise and speed of response.
Solving what was previously an unrecognised need can
often be fundamental to the efficiency, safety and
sustainability of our customers’ operations. This reinforces
the importance of our direct sales business model to
customers with our engineers able to ‘walk their plants’ or
increasingly through the advent of digital connectivity, ‘walk
their plants’ data’, converting insights into solutions.
How we engaged
• 2,100 direct sales and service engineers maintaining close
relationships
• Voice of customer (listening) activities and field trials of
new products
• Digital connectivity, insights and solutions
• Engagement with customers in Pharmaceutical &
Biotechnology and Semiconductor sectors to assist with
demand planning
• Three customers shared perspectives of working with
Spirax Group at our 2023 Leadership Conference
What we learnt
• Learnings from installations of our TargetZero solutions
at customer sites
• How well positioned we are to address customer
concerns about how to transfer heat into their industrial
processes while still meeting their net zero goals
• The acceleration of demand from customers for
electrification solutions
• Increasing commonality of shared customers across our
three Businesses
• There is high focus on shortening product development
times in the Semiconductor sector
I enjoyed meeting with the leaders of
Spirax Group last year to share
insights from Tetra Pak and highlight
the five areas that we focus on
within our partnership values
relationship model.”
Dariusz Koziarkiewicz
Category Manager, OEM Flow & Mechanic Systems, Tetra Pak
Packaging Solution AB
Outcomes
• Commercialisation of TargetZero, our solutions for the
decarbonisation of steam generation
• Investment in Project ClearSky, to decarbonise our UK
Steam Thermal Solutions manufacturing solutions using
all our TargetZero solutions
• US$58m investment in expansion of our Ogden
manufacturing facility, Utah (USA) to accelerate
production of electrification and decarbonisation
solutions
• Investment in Kyoto Group to accelerate the
decarbonisation of industrial process heat with Kyoto’s
Heatcube, a molten salt thermal energy storage solution
• Establishment of a Semiconductor New Product
Development Group in response to shortened customer
product development times in the sector
Spirax Group Annual Report 2023
29
Strategic Report Stakeholder engagement continued
Our communities
Why they are important
Many of our colleagues are also members of our local
communities. It’s where they and their families live. A
thriving community is good for business too. By looking
after our communities, we create a real sense of community
spirit and we help to protect the most vulnerable people in
society. Through a sustainable approach to investment in
education, we can also help secure our pipeline of future
talent.
What matters to them
Local communities want to be engaged and feel supported
by businesses operating on their doorsteps. They
understand that business and communities can create
mutual benefit and that current and future generations
flourish when those relationships are working well.
How we engaged
• Encouraged our colleagues to nominate their local
education projects to receive funding from the Spirax
Group Education Fund
• Proactively identified local needs and responded to
requests for support through local operating companies
• Responded to requests for support due to
natural disasters
• Representatives from two funded projects met and
presented to leaders at the Group leadership conference
on the impact made from funding received
What we learnt
• Issues of diversity, gender inequality, poverty and access
to quality education are closely intertwined, with poverty
a primary barrier to education
• That providing longer term support to causes enables
them to show funding stability and to access further
funding from other avenues
• The challenges of financing charitable operations in a
high-inflationary environments
Outcomes
• Supported our communities with over 25,000 volunteering
hours delivered by colleagues in 2023
• Donated over £75,000 to funds to support those affected
by earthquakes in Turkey, Syria and Morocco
• Increased our financial commitment to the Spirax Group
Education Fund pledging £15 million by 2030
30
Spirax Group Annual Report 2023
Your extraordinary support has not
only built walls and roofs but has
woven dreams, painted aspirations,
and constructed a gateway to a
brighter tomorrow for the children.
We did not just build a school, by
working together we built bridges of
hope and knowledge that echo in
every classroom.”
Shaimaa Tantawy
CEO, Man Ahyaha Association, Egypt
Strategic Report Our environment
Why it is important
The Earth’s temperature is rising. This rise in global
temperature is already having a devastating impact on the
environment. We need to take action now for our future
because we only have One Planet. That’s why we actively
promote local biodiversity initiatives to support the habitats
in the locations where our colleagues work.
What matters to it
Across the globe, Governments, Environmental Agencies,
businesses and industry, as well as the wider population,
are becoming increasingly concerned about the future of
our planet and are taking more actions to limit the global
temperature rise, to increase sustainable practices and
protect the Earth’s precious resources and biodiversity.
How we engaged
• Implemented local biodiversity initiatives on or close to
our sites
• Assessed and developed landscaping planting schemes
to improve the biodiversity as part of major construction
projects
• Focused on our top five internal consumers of water and
waste in in each Business by engaging colleagues to
make improvements
What we learnt
• Identified areas where we needed to preserve and
encourage biodiversity at our sites
• Understood where we could make the biggest
improvements in water and waste
Outcomes
• Reduced greenhouse gas emissions from our own
operations
Our biodiversity-focused partnership
with Spirax Group is now in its third
year. Each year the Group has
safeguarded an equal amount of
land to its physical operating
footprint, which has enabled World
Land Trust and our partners to bring
an incredible 1,656 acres of
threatened tropical habitat under
protection.”
• Undertaken biodiversity initiatives and worked towards
delivering a 10% net gain on new sites
Tracey Butler
Corporate Partnerships Manager, World Land Trust
• Decreased our water consumption by improving efficiency
at our sites and increasing colleague engagement
• Funded the protection of a further 572 acres of land on
the Somuncurá Plateau in Argentinian Patagonia,
equivalent to our operating footprint (including
acquisitions)
Spirax Group Annual Report 2023
31
Strategic Report Stakeholder engagement continued
Our suppliers
Why they are important
As we progress towards our ambition of becoming a leader
in industrial sustainability, we recognise the importance of
achieving sustainable supply chains. By working closely
with our direct suppliers we aim to achieve a sustainable
supply chain and reach our 2050 net zero targets which
have been approved by the SBTi Net-Zero Standard.
What matters to them
Many of our suppliers care about the impact they have on
the planet and want to form mutually beneficial, long-term
partnerships that help them fulfil their potential, as well as
their sustainability goals as they continue on their journey.
How we engaged
• Supplier sustainability surveys on ten different topics
• Supplier Sustainability Portal training and One Planet
introduction webinars
• 1-2-1 meetings
What we learnt
• An understanding of where our supply chain is today on
its sustainability journey so we can establish strategies for
the future
• Understanding of where there are sustainability risks in
our supply chain so we can explore further
• Identified a need to upskill our teams so they can have
better conversations with our suppliers about
sustainability
Outcomes
• Over 1,800 direct suppliers signed up to our updated
Supplier Sustainability Code at the end of 2023
• Development and delivery of webinars to support
suppliers with completing sustainability surveys
• 825 training courses completed by our internal teams
equipping them to proactively engage with suppliers on
sustainability topics
32
Spirax Group Annual Report 2023
Our One Planet Sustainability
Strategy set out the minimum
standards we expect from our
suppliers. Helping our suppliers
meet these minimum standards is
not just important for us, it will make
a positive difference to their
operations and the planet.”
Sarah Peers
Group Director of Sustainability
Strategic Report Our shareholders
Why they are important
When our shareholders understand, believe in and benefit
from what we do, they continue to support us both now and
into the future.
What matters to them
Accurate, transparent and reliable communications and a
return on their investments in both the short and long term.
How we engaged
• Presentations of our Full and Half Year Results
• Annual General Meeting
• Steam Thermal Solutions Investor Seminar
• Investor roadshows and sell-side conferences
• Investor meetings and site tours
What we learnt
• Key areas of concern and interest for shareholders
• Market perception of macro and micro events and how
that might influence their approach to investing in Spirax
Group
Outcomes
• Continue holding a mixture of virtual and in-person events
• Constant review of information presented to the market to
ensure it continues to be valuable and insightful
We have deepened and broadened
our investor engagement during
2023 and look forward to
maintaining a constructive dialogue
with all our shareholders in 2024.”
Mal Patel
Head of Investor Relations, Spirax Group
Spirax Group Annual Report 2023
33
Strategic Report Key performance indicators
Our key performance indicators are used to measure
the successful implementation of our strategy.
1. Organic revenue growth†
2. Adjusted operating
3. Adjusted operating
profit*
profit margin*
4. Adjusted earnings
per share (EPS)*
5. Cash generation*
7. Group GHG emissions
Principal Risks
6. All-workplace
Injury rate^ #
(scope 1 and 2) tonnes
CO2e (market-based)^
-1%
2023
-1
2022
2021
2020
-3
2019
6
£349.1m
20.7%
312.4p
14
17
2023
2022
2021
2020
2019
349.1
380.2
340.3
270.4
282.7
2023
2022
2021
2020
2019
20.7
23.6
2023
2022
312.4
377.2
25.3
2021
338.9
22.7
22.8
2020
2019
256.6
265.7
Link to Principal Risk
1 2 3 4 5 6 7 8
Link to Principal Risk
1 2 3 4 5 6 7 8
Link to Principal Risk
1 2 3 4 5 6 7 8
Link to Principal Risk
1 2 3 4 5 6 7 8
Link to Principal Risk
Link to Principal Risk
Link to Principal Risk
1 2 3 4 5 6 7 8
1 2 3 4 5 6 7 8
1 2 3 4 5 6 7 8
Link to Strategy
Link to Strategy
Link to Strategy
Link to Strategy
Link to Strategy
Link to Strategy
Link to Strategy
Definition
Organic revenue growth
measures the change in revenue
in the current year compared with
the prior year from continuing
Group operations. The effects of
currency movements, acquisitions
and disposals have been
removed.
Definition
Adjusted operating profit is the
profit earned from our business
operations before interest, taxes,
the share of profit of associate
companies and certain other
items.
Definition
Adjusted operating profit margin
is defined as adjusted operating
profit expressed as a percentage
of revenue.
Definition
Earnings per share is a measure
of the profit performance of
the Group, taking into account the
equity structure. EPS is defined as
the adjusted after-tax profit
attributable to equity
shareholders divided by the
weighted average number of
shares in issue.
Progress in 2023
Sales increased by 8% organically
in Steam Thermal Solutions and
by 2% organically in Electric
Thermal Solutions, but decreased
by 19% organically in Watson-
Marlow.
Progress in 2023
Adjusted operating profit
decreased by 8%, reflecting an
organic decrease of 12%,
alongside a decrease of 2% due
to exchange rates and a 6%
increase from the full year impact
of acquisitions.
Progress in 2023
Decreased by 290 bps to 20.7%.
On an organic basis, the adjusted
operating profit margin decreased
by 270 bps.
Progress in 2023
Decreased by 17% to 312.4
pence, in line with the decrease in
adjusted profit before tax.
Read about the progress
we have made in 2023
in our three Businesses
in the Operating Review
on pages 46-57
Read about the progress
we have made in 2023
in our three Businesses
in the Operating Review
on pages 46-57
Read about the progress
we have made in 2023
in our three Businesses
in the Operating Review
on pages 46 to 57
Link to remuneration
A significant proportion of
Executive Directors’ bonuses are
based on the achievement of
adjusted operating profit targets.
Link to remuneration
Executive Directors’ variable
remuneration is based on a
number of financial components
of which adjusted operating profit
margin is a key driver.
Link to remuneration
EPS growth over a three-year
period is a key measure within the
Group’s Performance Share Plan.
Read about the progress
we have made in 2023
in our three Businesses
in the Operating Review
on pages 46 to 57
Link to remuneration
Revenue growth is a key driver of
profit generation and a central
element in the annual planning
process. Bonus targets are driven
off annual plans and therefore
revenue growth drives a key
measure of variable remuneration.
34
Spirax Group Annual Report 2023
1. Economic and political
instability
2. Significant exchange rate
movement
3. Cybersecurity
4. Failure to realise acquisition
objectives
5. Loss of manufacturing output
at any Group factory
6. Inability to identify and
respond to changes in
customer needs: Digital/
Non-Digital
7. Loss of critical supplier
8. Breach of legal and
regulatory requirements
(including ABC laws)
Link to Principal Risk key:
Direct link
Indirect link
No link
See our Principal Risks on
pages 101–105 of our Risk
Management Report
More information about
remuneration, see pages
155–178
† Organic growth is at constant
currency and excludes
contributions from acquisitions
and disposals, see the Appendix
to the Financial Statements.
* Based on adjusted operating
profit. Adjusted operating profit
excludes certain items as set
out and explained in the Financial
Review and in the Appendix to
the Financial Statements.
^ Excluding 2022 acquisitions
# Per 100,000 hours worked
Strategic themes
Increase direct sales
effectiveness through
market sector focus.
Develop the knowledge
and skills of our expert
sales and service teams.
Broaden our
global presence.
Leverage our
R&D investments.
Optimise our supply
chain effectiveness.
Operate sustainably and
help improve our
customers’ sustainability.
Definition
Definition
Definition
Cash generation is adjusted
The number of workplace injuries
Scope 1 greenhouse gas (GHG)
operating profit after adding back
per 100,000 hours worked. The
emissions arise directly from
workplace is any location in which
company-owned or company-
depreciation and amortisation,
less cash payments to pension
an employee is present as a
schemes in excess of the charge
requirement of employment.
controlled sources, such as
company vehicles or fuel
to operating profit, equity settled
Employees include all permanent
combustion. Scope 2 GHG
share plans, net capital
and temporary staff and
emissions are indirect emissions,
expenditure excluding acquired
contractors. All injuries that occur
primarily from the generation of
intangibles, working capital
changes and repayment of
in workplaces, regardless of
purchased electricity. Market-
cause, are included, as are road
based emissions take into
principal under lease liabilities.
traffic accidents.
account contractual and
supplier-specific GHG emissions
factors.
Progress in 2023
Progress in 2023
Progress in 2023
Cash conversion improved to
Our all-workplace injury rate
GHG (scope 1 and 2) decreased
81%, mainly driven by the phasing
decreased during 2023, falling
by 6% compared to 2022 and by
of a number of larger capital
from 1.75 per 100,000 hours in
45% against our 2019 baseline
projects and lower working capital
2022, to 1.55 per 100,000 hours in
due to decarbonisation initiatives,
outflows.
Read about the progress
we have made in 2023
in our three Businesses
in the Operating Review
on pages 46 to 57.
2023, which is an early indication
an increase in operational
of our wider risk reduction
strategy making an impact.
efficiency and transition to
renewable electricity supply.
Read about the progress we
have made in 2023 in our three
Businesses in the Sustainability
Report on pages 60 to 97
Read about the progress we
have made in 2023 in our three
Businesses in the Sustainability
Report on pages 60 to 97
Link to remuneration
Link to remuneration
Link to remuneration
Cash generation is one of two
The safety of our colleagues is
GHG emission reductions over
financial measures on which
Executive Directors’ variable
remuneration is based.
central to the sustainability of our
three-year periods accounts for
business and has an impact on
20% of the Performance Share
Plan opportunity.
the financial success and
profitability of the Group.
Improving the health, safety and
sustainability of our Group is one
of the personal strategic
objectives of each Executive
Director, creating a direct link with
remuneration.
Strategic Report
1. Organic revenue growth†
2. Adjusted operating
3. Adjusted operating
4. Adjusted earnings
5. Cash generation*
profit*
profit margin*
per share (EPS)*
6. All-workplace
Injury rate^ #
£281.7m
1.55
2023
2022
2021
2020
2019
281.7
2023
1.55
214.9
277.7
275.8
238.1
2022
2021
2020
2019
1.75
2.22
2.62
7. Group GHG emissions
(scope 1 and 2) tonnes
CO2e (market-based)^
25,310 tonnes
2023
2022
2021
2020
25,310
26,938
38,981
40,255
3.44
2019
46,206
Link to Principal Risk
Link to Principal Risk
Link to Principal Risk
Link to Principal Risk
1 2 3 4 5 6 7 8
1 2 3 4 5 6 7 8
1 2 3 4 5 6 7 8
1 2 3 4 5 6 7 8
Link to Principal Risk
1 2 3 4 5 6 7 8
Link to Principal Risk
1 2 3 4 5 6 7 8
Link to Principal Risk
1 2 3 4 5 6 7 8
Link to Strategy
Link to Strategy
Link to Strategy
Link to Strategy
Link to Strategy
Link to Strategy
Link to Strategy
Definition
Definition
Definition
Definition
Organic revenue growth
Adjusted operating profit is the
Adjusted operating profit margin
Earnings per share is a measure
measures the change in revenue
profit earned from our business
is defined as adjusted operating
of the profit performance of
in the current year compared with
operations before interest, taxes,
profit expressed as a percentage
the Group, taking into account the
the prior year from continuing
the share of profit of associate
of revenue.
equity structure. EPS is defined as
Group operations. The effects of
companies and certain other
currency movements, acquisitions
items.
and disposals have been
removed.
the adjusted after-tax profit
attributable to equity
shareholders divided by the
weighted average number of
shares in issue.
Progress in 2023
Progress in 2023
Progress in 2023
Progress in 2023
Sales increased by 8% organically
Adjusted operating profit
Decreased by 290 bps to 20.7%.
Decreased by 17% to 312.4
in Steam Thermal Solutions and
decreased by 8%, reflecting an
On an organic basis, the adjusted
pence, in line with the decrease in
by 2% organically in Electric
organic decrease of 12%,
operating profit margin decreased
adjusted profit before tax.
Thermal Solutions, but decreased
alongside a decrease of 2% due
by 270 bps.
by 19% organically in Watson-
to exchange rates and a 6%
Marlow.
Read about the progress
we have made in 2023
in our three Businesses
in the Operating Review
on pages 46 to 57
increase from the full year impact
of acquisitions.
Read about the progress
we have made in 2023
in our three Businesses
in the Operating Review
on pages 46 to 57
Read about the progress
we have made in 2023
in our three Businesses
in the Operating Review
on pages 46-57
Read about the progress
we have made in 2023
in our three Businesses
in the Operating Review
on pages 46-57
Link to remuneration
Revenue growth is a key driver of
profit generation and a central
element in the annual planning
Link to remuneration
A significant proportion of
Link to remuneration
Executive Directors’ variable
Link to remuneration
EPS growth over a three-year
Executive Directors’ bonuses are
remuneration is based on a
period is a key measure within the
based on the achievement of
number of financial components
Group’s Performance Share Plan.
process. Bonus targets are driven
adjusted operating profit targets.
of which adjusted operating profit
margin is a key driver.
off annual plans and therefore
revenue growth drives a key
measure of variable remuneration.
Definition
Cash generation is adjusted
operating profit after adding back
depreciation and amortisation,
less cash payments to pension
schemes in excess of the charge
to operating profit, equity settled
share plans, net capital
expenditure excluding acquired
intangibles, working capital
changes and repayment of
principal under lease liabilities.
Definition
The number of workplace injuries
per 100,000 hours worked. The
workplace is any location in which
an employee is present as a
requirement of employment.
Employees include all permanent
and temporary staff and
contractors. All injuries that occur
in workplaces, regardless of
cause, are included, as are road
traffic accidents.
Definition
Scope 1 greenhouse gas (GHG)
emissions arise directly from
company-owned or company-
controlled sources, such as
company vehicles or fuel
combustion. Scope 2 GHG
emissions are indirect emissions,
primarily from the generation of
purchased electricity. Market-
based emissions take into
account contractual and
supplier-specific GHG emissions
factors.
Progress in 2023
Cash conversion improved to
81%, mainly driven by the phasing
of a number of larger capital
projects and lower working capital
outflows.
Read about the progress
we have made in 2023
in our three Businesses
in the Operating Review
on pages 46 to 57.
Progress in 2023
Our all-workplace injury rate
decreased during 2023, falling
from 1.75 per 100,000 hours in
2022, to 1.55 per 100,000 hours in
2023, which is an early indication
of our wider risk reduction
strategy making an impact.
Progress in 2023
GHG (scope 1 and 2) decreased
by 6% compared to 2022 and by
45% against our 2019 baseline
due to decarbonisation initiatives,
an increase in operational
efficiency and transition to
renewable electricity supply.
Read about the progress we
have made in 2023 in our three
Businesses in the Sustainability
Report on pages 60 to 97
Read about the progress we
have made in 2023 in our three
Businesses in the Sustainability
Report on pages 60 to 97
Link to remuneration
Cash generation is one of two
financial measures on which
Executive Directors’ variable
remuneration is based.
Link to remuneration
GHG emission reductions over
three-year periods accounts for
20% of the Performance Share
Plan opportunity.
Link to remuneration
The safety of our colleagues is
central to the sustainability of our
business and has an impact on
the financial success and
profitability of the Group.
Improving the health, safety and
sustainability of our Group is one
of the personal strategic
objectives of each Executive
Director, creating a direct link with
remuneration.
Principal Risks
1. Economic and political
instability
2. Significant exchange rate
movement
3. Cybersecurity
4. Failure to realise acquisition
objectives
5. Loss of manufacturing output
at any Group factory
6. Inability to identify and
respond to changes in
customer needs: Digital/
Non-Digital
7. Loss of critical supplier
8. Breach of legal and
regulatory requirements
(including ABC laws)
Link to Principal Risk key:
Direct link
Indirect link
No link
See our Principal Risks on
pages 101–105 of our Risk
Management Report
More information about
remuneration, see pages
155–178
† Organic growth is at constant
currency and excludes
contributions from acquisitions
and disposals, see the Appendix
to the Financial Statements.
* Based on adjusted operating
profit. Adjusted operating profit
excludes certain items as set
out and explained in the Financial
Review and in the Appendix to
the Financial Statements.
^ Excluding 2022 acquisitions
# Per 100,000 hours worked
Strategic themes
Increase direct sales
effectiveness through
market sector focus.
Develop the knowledge
and skills of our expert
sales and service teams.
Broaden our
global presence.
Leverage our
R&D investments.
Optimise our supply
chain effectiveness.
Operate sustainably and
help improve our
customers’ sustainability.
Spirax Group Annual Report 2023
35
Strategic Report
Financial Review
Early actions taken in response
to challenging trading
environment
Revenue (£)
£1,682.6m
Operating profit (£)
£349.1m
The Group has balanced
continuing strategic investment
alongside restructuring and cost
containment as we have navigated
2023. Our business model
positions us well to deliver
future growth.”
Phil Scott
Interim Chief Financial Officer
36
Spirax Group Annual Report 2023
Strategic Report £m
Revenue
Adjusted operating profit
Adjusted operating profit margin
Statutory operating profit
Statutory operating profit margin
2022
Exchange
Organic
Acquisitions
& disposals *
2023
Organic
Reported
1,610.6
380.2
23.6%
318.8
19.8%
(27.2)
(7.1)
(16.0)
(45.9)
115.2
21.9
1,682.6
349.1
-1%
-12%
+4%
-8%
20.7%
-270bps
-290bps
284.4
16.9%
-11%
-290bps
* Results include the impact of the acquisition of Vulcanic and Durex Industries and the treatment of our Russian operating companies as disposals
from the date at which the Group suspended all trading with and within Russia
To aid comparability with the prior year we refer to both organic and
proforma performance measures in the commentary below. Organic
performance measures include the contribution of Vulcanic and
Durex Industries only for the like-for-like periods of ownership.
Proforma comparisons include contribution from Vulcanic and
Durex Industries, as if they had been fully owned by the Group
throughout 2022.
Sales
Group sales grew by 4%, with full year contributions from Vulcanic
and Durex Industries (acquired in late 2022) partly offset by the
disposal of our Russian operations, which had a small adverse
impact. Group sales were 1% lower organically, compared to 2022,
being 2% higher in the first half and 4% lower in the second half.
Organic sales growth in STS (8%) was significantly ahead of IP
albeit with strong first half growth of 15% moderating to 2% in the
second half. Second half trading was characterised by weakening
macroeconomic conditions, especially in China and Germany. Large
project orders were higher, compared to 2022, with growth
significantly weighted to the first half of the year, reflecting
customers’ weakening confidence in the economic outlook and
reduction in capital investment through the course of the year.
Organic sales growth in ETS (2%) was supported by demand from
industrial process heating customers in Chromalox. Thermocoax
sales were flat, compared to 2022, due to lower demand from
Semicon customers. Chromalox’s manufacturing facility in Ogden,
Utah (USA) continued to implement operational improvements
aimed at increasing throughput, but sales lagged the even stronger
growth in demand for bespoke solutions that deliver
decarbonisation benefits. We remain focused on delivering higher
sales from Ogden while also completing the facility expansion.
On a proforma basis, Vulcanic sales were higher, also supported by
demand from industrial process heating customers. However, this
growth was more than offset by significantly lower sales in Durex
Industries due to lower demand from Semicon customers
(accounting for approximately 55% of Durex Industries sales in
2022), with combined proforma sales down by 6%.
Watson-Marlow sales were down by 19% organically, driven by
ongoing destocking by Biopharm customers, which began in the
second half of 2022. During 2023, the organic decline in Biopharm
sales was greater in the first half than in the second half as a result
of the more challenging comparator. Biopharm sales remained
broadly flat in the second half compared to the first half. Sales to
Process Industries customers, which are more directly correlated to
IP, were broadly flat in the first half, compared to 2022. In the
second half of 2023, Process Industries demand was impacted by
the weakening macroeconomic outlook, with sales broadly similar
to the first half.
Adjusted operating profit
Group adjusted operating profit was down 8%, or 12% organically.
Strong organic growth in adjusted operating profit in STS of 15%,
driven by higher sales and cost containment initiatives, was offset
by organic declines in operating profit in ETS (4%) and Watson-
Marlow (43%). Watson-Marlow’s adjusted operating profit includes
a one-off charge in respect of excess Biopharm inventories in the
second half.
Corporate expenses, which are included in adjusted operating
profit, grew by 8% to £27.8 million (2022: £25.8 million). This
increase reflects ongoing investment to support key strategic
initiatives, partially offset by cost containment measures and
reduced variable compensation. We expect corporate expenses in
2024 to increase at more than twice the rate of Group organic sales
growth due to: increased investment in strategic initiatives; the
reversal of cost containment measures in the first half; and an
increase in variable compensation, subject to performance targets
being achieved.
Adjusted operating profit margin
Group adjusted operating profit margin of 20.7% was down 270 bps
organically, reflecting the impact of lower sales from our higher
margin businesses, partially mitigated by strong price discipline
even as cost inflationary pressures eased and the benefits of early
restructuring and cost containment actions.
STS adjusted operating profit margin of 24.6% saw strong organic
progression (up 140 bps), reflecting sales growth, cost containment
initiatives and strong pricing discipline. Sequentially, the second
half margin was slightly higher than the first half margin. However,
the second half margin was impacted by weakening IP in China and
Germany as well as a slowdown in large projects sales, resulting in
a smaller organic increase than in the first half, compared to 2022.
The increase in the STS adjusted operating profit margin was offset
by organic declines in ETS (90 bps) and Watson-Marlow (1,030
bps).
The organic decline in the ETS adjusted operating profit margin
primarily reflects the impact of lower sales to customers in the
higher margin Semicon sector, but also investments in onboarding
costs for Vulcanic and Durex Industries and ongoing operational
improvement initiatives in Chromalox’s Ogden facility. On a
proforma basis ETS adjusted profit margin (15.6%) was 300 bps
lower, compared to 2022.
Chromalox and Thermocoax combined adjusted operating profit
margin in the second half of 2023 was above both the first half of
the year and the second half of 2022. Excluding onboarding costs,
Vulcanic adjusted operating profit margin in 2023 was also higher,
compared to 2022. Durex Industries suffered a significant decline in
adjusted operating profit margin as a result of lower Semicon
demand despite cost actions.
Watson-Marlow’s adjusted operating profit margin of 23.8% fell by
1,030 bps organically. Although sales were broadly similar across
the first half and second half, the second half adjusted operating
profit margin benefited from restructuring actions taken during the
first half, offset by a one-off charge in respect of excess Biopharm
inventories.
Spirax Group Annual Report 2023
37
Strategic Report Financial Review continued
Statutory operating profit and margin
Statutory operating profit decreased by 11% to £284.4 million
(2022: £318.8 million) and the statutory operating profit margin of
16.9% was down 290 bps (2022: 19.8%). Statutory operating profit
and statutory operating profit margin are impacted by the same
drivers as explained in the adjusted operating profit sections above,
as well as the reconciling items as follows:
• Charges of £5.7 million relating to the acquisitions of Vulcanic
and Gestra Malaysia. Included within this amount is a charge of
£4.9 million which represents the fair value movement in deferred
consideration payable by Vulcanic in relation to the acquisition of
EML Manufacturing LLC in 2021
• A charge of £37.2 million (2022: £23.7 million) for the
amortisation of acquisition-related intangible assets. The
year-on-year increase was driven by a full year of amortisation of
the intangible assets relating to Vulcanic and Durex Industries
which were acquired in late 2022
• A charge of £1.3 million from the reversal of fair value
adjustments to inventory on the acquisition of Vulcanic
• A profit of £0.4 million on the disposal of Econotherm (UK) Ltd, an
associate investment
• A restructuring charge of £7.5 million in Watson-Marlow to
appropriately right-size manufacturing capacity and reduce
overhead support costs in order to offset the adverse impact of
lower sales volumes; and a £1.8 million charge in relation to the
impairment of non-current assets in Watson-Marlow
• A credit of £2.3 million relating to the release of the provision
held in Chromalox for the restructuring of its manufacturing
operation in Soissons (France)
• A one-off impairment charge of £13.9 million relating to a global
ERP programme implementation within STS (further details are
set out in the STS operating review)
Net financing expense
Net financing expenses increased to £39.9 million (2022: £10.7
million) comprising £35.6 million of net bank interest (2022: £8.4
million), £2.1 million of interest on pension liabilities (2022: £0.8
million) and £2.2 million of interest on lease liabilities (2022: £1.5
million). Bank interest increased due to the full year impact of higher
net debt following the acquisitions of Vulcanic and Durex Industries
at the end of 2022, together with the refinancing of maturing fixed
rate debt at higher interest coupons due to increases in market
interest rates.
Profit before tax
Adjusted profit before tax was down 17% to £309.2 million (2022:
£370.6 million), driven by an 8% decrease in adjusted operating
profit and additional net financing expense. Statutory profit before
tax was down 21% to £244.5 million (2022: £308.1 million). The
reconciling items between adjusted profit before tax and statutory
profit before tax are shown above and in the Appendix to the
Financial Statements.
Taxation
The Group tax rate reflects the blended average of rates in tax
jurisdictions around the world in which the Group operates. As
expected, the Group adjusted effective tax rate increased by 50
bps to 25.5% (2022: 25.0%) and on a statutory basis the Group
effective tax rate was 24.7% (2022: 27.0%). The increase in the
Group adjusted effective tax rate was driven by changes in the
Group’s profit mix by tax jurisdiction, including the impact of a full
year of ownership of Vulcanic and Durex Industries, together with
the impact of increased withholding tax on intra-Group dividend
payments when combined with lower adjusted profit.
The Group is subject to a local tax adjustment in Argentina that
seeks to offset the impact of inflation on taxable profits. Given the
current level of inflation in Argentina, this has a meaningful impact
on the effective tax rate. While we include the expected impact of
this adjustment in our guidance for the effective tax rate, this is
difficult to accurately forecast given the current volatility of
Argentinian inflation.
38
Spirax Group Annual Report 2023
The Group monitors income tax developments in the countries in
which it operates, including the OECD Base Erosion and Profit
Shifting (BEPS) initiative to set a minimum global tax rate of 15%
(Pillar Two). The main jurisdiction where this initiative may impact
the Group is in Argentina as the impact of the inflation adjustment
may result in a local tax rate that falls below 15%. As noted above,
given the volatility of Argentinian inflation it is difficult to accurately
forecast its impact on the Group’s tax charge. The Group is
continuing to monitor the impact of the Pillar Two income taxes
legislation on its future financial performance.
On 8th June 2022, the European Union (EU) General Court
published its decision on the appeals for annulment made against
the European Commission’s (EC) 2019 decision that certain aspects
of the UK’s Controlled Foreign Company regime constituted State
Aid, finding in favour of the EC. The UK Government has appealed
the decision of the EU General Court. Whilst the EU General Court
ruling was in favour of the EC, our assessment is that there are
grounds for successful appeal. As a result, we have continued to
recognise a receivable of £4.9 million in the Consolidated
Statement of Financial Position. This relates to the full amount paid
to HM Revenue & Customs for Charging Notices received in 2021.
We have not recognised a receivable for any repayment interest on
the £4.9 million. The Group has not received a Charging Notice for
either the benefit received prior to 2017, which is estimated to be
£2.9 million, or the benefit received during 2019 of £1.1 million. No
provisions have currently been recognised relating to these
amounts and therefore they remain a contingent liability at 31st
December 2023.
For 2024, we currently anticipate that the Group adjusted effective
tax rate will increase by up to 100 bps, compared to 2023, to
approximately 26.5% based on a forecast mix of profits and level of
inflation in Argentina.
Earnings per share
Adjusted basic earnings per share decreased by 17% to 312.4 pence
(2022: 377.2 pence), consistent with the decrease in adjusted
operating profit and increased net financing costs. Statutory basic
earnings per share were 249.5 pence (2022: 305.1 pence). The
statutory fully diluted earnings per share were not materially
different to the statutory basic earnings per share in either year.
Dividends
The Group has a progressive dividend policy, the aim of which is to
provide sustainable, affordable dividend growth. The Group has a
55-year track record of dividend progress with a compound annual
increase of 11% over that period.
The Board is proposing a final dividend of 114.0 pence per share for
2023 (2022: 109.5 pence) payable on 24th May 2024 to
shareholders on the register at 26th April 2024. Together with the
interim dividend of 46.0 pence per share (2022: 42.5 pence), the
total dividend for the year is 160.0 pence per share, an increase of
5% on the total dividend of 152.0 pence per share in 2022. Dividend
cover in 2023 will reduce to 2.0x, the lower end of the Group’s
target range of 2.0x to 2.5x, improving over the medium-term as a
recovery in demand drives earnings growth.
The total amount paid in dividends during the year was £114.9
million, 11% above the £103.6 million paid in 2022.
Currency movements
The Group’s Income Statement and Statement of Financial Position
are exposed to movements in a wide range of different currencies.
This stems from our direct sales business model, with a large
number of local operating companies. These currency exposures
and risks are managed through a rigorously applied Treasury Policy,
typically using centrally managed and approved simple forward
contracts to mitigate exposures to forecast future cash flows and
avoiding the use of complex derivative transactions. The largest
individual currency exposures are to the euro, US dollar, Chinese
renminbi and Korean won. Whilst the size of the Group’s businesses
in Argentina is immaterial to the consolidated financial results, the
level of volatility in the Argentinian peso has had a negative
translational impact on Group reported financial performance. While
currency effects can be significant, the structure of the Group
Strategic Report provides some mitigation through our regional manufacturing
presence, diverse spread of geographic locations and through the
natural hedge of having a high proportion of our overhead costs in
the local currencies of our operating companies.
Currency movements negatively impacted adjusted operating profit
by 2% with a transactional benefit of £5.9 million being offset by a
translational downside of £13.0 million. The translation downside
reflects the impact of the strengthening of sterling in 2023 against
the currencies in which the Group generated its adjusted operating
profit. The main transactional exposure flow affecting the Group is
the export of products from our factories in the UK, invoiced in
sterling, less the import of goods from overseas Group factories
and third parties priced predominately in euros and US dollars. The
net exposure to transactional currency movements is approximately
£120 million.
If exchange rates at the end of February were to prevail for the
remainder of 2024, there would be a headwind impact of
approximately 3% on 2023 sales, or approximately 2% excluding the
significant devaluation of the Argentine peso in December 2023. On
the same basis, the headwind impact on 2023 adjusted operating
profit would be approximately 5%, or approximately 2% excluding
the Argentine peso devaluation.
Capital employed
Capital employed increased by £46.2 million to £938.7 million at
31st December 2023. Tangible fixed assets (property, plant &
equipment and right-of-use-assets) increased by £61.8 million to
£513.5 million, principally as a result of the completion of the new
manufacturing facility for Watson-Marlow in Devens,
Massachusetts (USA) together with the commencement of the
construction project to expand the Chromalox facility in Ogden,
Utah (USA) in order to meet customer demand for Medium Voltage
decarbonisation solutions.
Net capital expenditure in the period was £102.8 million. This was
lower than anticipated as a result of changes in the phasing of
payments on a number of large capital projects. In 2024, we expect
the ratio of capital expenditure to sales to increase to 7% reflecting
the impact of phasing delays from 2023 together with the ongoing
expansion of the Ogden facility.
The capital intensity of our business is low with historic capital
expenditure typically amounting to between 4% and 6% of sales.
Excluding our investment in new construction projects, capital
expenditure, as a percentage of sales, would be at the low end of
our typical range.
Total working capital increased by £9.3 million and the ratio of
working capital to sales was, as expected, 22.8% (2022: 22.8% on a
proforma basis). It is expected that the working capital to sales ratio
will remain at a consistent level in 2024.
Capital employed
Property, plant and equipment
Right-of-use assets
Software & development costs
Non-current prepayments
Inventories
Trade receivables
Other current assets
Tax recoverable
Trade, other payables and current provisions
Current tax payable
Capital employed
Acquired intangibles including goodwill
Investment in Associate
Post-retirement benefits
Net deferred tax
Non-current provisions and long-term payables
Lease liabilities
Net debt
Net assets
Adjusted operating profit
Adjusted operating profit (excluding acquisitions, disposals and leases)
Average capital employed
Average capital employed (excluding acquisitions, disposals and leases)
Return on capital employed
Return on capital employed (excluding acquisitions, disposals and leases)
2023
£m
415.1
98.4
42.3
1.9
285.2
299.8
71.4
13.6
2022
£m
384.5
67.2
44.5
2.0
290.0
341.1
79.6
19.0
(260.7)
(295.0)
(28.3)
938.7
1,087.0
3.0
(51.4)
(37.2)
(19.0)
(96.7)
(40.4)
892.5
1,159.1
—
(52.1)
(59.1)
(15.0)
(65.2)
(666.7)
(690.4)
1,157.7
1,169.8
349.1
317.7
915.6
772.4
38.1%
41.1%
380.2
369.9
775.9
677.5
49.0%
54.6%
Spirax Group Annual Report 2023
39
Strategic Report Financial Review continued
Capital employed continued
Return on capital employed (ROCE)
ROCE reduced by 1,090 bps to 38.1% (2022: 49.0%). Excluding the
impacts of acquisitions, disposals and leases, ROCE decreased by
1,350 bps to 41.1% (2022: 54.6%), driven by capital investments as
well as the impact of the challenging trading environment on
adjusted operating profit. ROCE is defined in the Appendix to the
Financial Statements, see page 243.
Return on invested capital (ROIC)
ROIC decreased by 480 bps to 13.5% (2022: 18.3%). Excluding the
impacts of acquisitions, disposals and leases, ROIC decreased by
430 bps to 17.7% (2022: 22.0%), driven by a decrease in adjusted
operating profit after tax. ROIC is defined in the Appendix to the
Financial Statements, see page 243.
Adjusted cash flow
Adjusted cash from operations is a measure of the cash flow
generated from our operating companies. A reconciliation with
statutory operating cash flow can be found in the Appendix to the
Financial Statements.
Adjusted cash from operations of £281.7 million (2022: £214.9
million) was up £66.8 million, resulting in an improved adjusted cash
conversion of 81% (2022: 57%). The improvement in cash
conversion was driven by lower than anticipated capital expenditure
(as outlined above) together with a lower working capital outflow
which offset the fall in adjusted operating profit.
Tax paid in the period of £90.7 million (2022: £90.0 million) has
remained relatively consistent year-on-year. Adjusted free cash
flow of £153.3 million (2022: £116.1 million) has increased by 32%
driven by improved adjusted cash from operations but negatively
impacted by increased net interest payments in the period.
Dividend payments were £114.9 million (2022: £103.6 million)
including payments to minority shareholders, and reflect the final
dividend for 2022, as well as the interim dividend for 2023.
Share purchases, net of new shares issued for the Group’s various
employee share schemes, resulted in a cash outflow of £10.8 million
(2022: £19.0 million) reflecting a lower vesting of the Group’s
Performance Share Plan.
Acquisitions (net of disposals) during the year amounted to £7.7
million (2022: £538.3 million), primarily reflecting the purchase by
Gestra of a local Malaysian distributor and the acquisition of a 15%
stake in Kyoto Group.
Restructuring spend of £8.1 million relates primarily to the right-
sizing of capacity and overhead support costs undertaken in
Watson-Marlow.
The £31.5 million increase in lease liabilities was largely driven by
the lease commitment for the Watson-Marlow manufacturing
facility in Devens, Massachusetts (USA).
Adjusted Cash flow
Adjusted operating profit
Depreciation and amortisation (excl. leased assets)
Depreciation of leased assets
Cash payments to pension schemes more than the charge to adjusted operating profit
Equity settled share plans
Working capital changes
Repayments of principal under lease liabilities
Capital expenditure (including software and development)
Capital disposals
Adjusted cash from operations
Net interest
Income taxes paid
Adjusted free cash flow
Net dividends paid
Purchase of employee benefit trust shares/Proceeds from issue of shares
(Acquisitions)/Disposals of subsidiaries
Restructuring costs
Cash flow for the year
Exchange movements
Opening net debt
Net debt at 31st December
Lease liability
Net debt and lease liability at 31st December
40
Spirax Group Annual Report 2023
2023
£m
349.1
44.2
16.2
(5.7)
6.1
(9.3)
(16.1)
(102.8)
—
281.7
(37.7)
(90.7)
153.3
2022
£m
380.2
36.0
13.4
(5.3)
8.9
(91.9)
(12.9)
(117.5)
4.0
214.9
(8.8)
(90.0)
116.1
(114.9)
(103.6)
(10.8)
(7.7)
(8.1)
11.8
11.9
(19.0)
(538.3)
(3.2)
(548.0)
(11.9)
(690.4)
(130.5)
(666.7)
(690.4)
(96.7)
(65.2)
(763.4)
(755.6)
Strategic Report Going Concern statement
The Group’s principal objective when managing liquidity is to
safeguard the ability to continue as a going concern for at least 12
months from the date of signing the 2023 Annual Report. The Group
retains sufficient resources to remain in compliance with all the
required terms and conditions within its borrowing facilities with
material headroom and no material uncertainties have been
identified.
The Group continues to conduct ongoing risk assessments on its
business operations and liquidity. Consideration has also been
given to reverse stress tests, which seek to identify factors that
might cause the Group to require additional liquidity and form a
view as to the probability of these occurring.
The Group’s financial position remains robust, with the next
maturity of our committed debt facilities being US$150 million of
Bank Term loan which matures in October 2025 and which are
accounted for within the cash flow forecast model. The Group’s
debt facilities contain a leverage covenant of up to 3.5x. Certain
debt facilities also contain an interest cover covenant of a minimum
of 3.0x. The Group regularly monitors its financial position to ensure
that it remains within the terms of these debt covenants. At 31st
December 2023 leverage (defined as net debt excluding lease
liabilities divided by adjusted earnings before interest, tax,
depreciation and amortisation) was 1.7x (2022: 1.7x), Interest cover
(defined as adjusted earnings before interest, tax, depreciation and
amortisation divided by net bank interest) was 10x at 31st
December 2023 (2022: 58x).
Reverse ‘stress testing’ was also performed to assess the level of
business under-performance would be required for a breach of the
financial covenants to occur, the results of which evidenced that no
reasonably possible change in future forecast cash flows would
cause a breach of these covenants. In addition, the reverse stress
test cash flow modelling does not take into account any mitigating
actions which the Group would implement in the event of a severe
and extended revenue and profitability decline. Such actions would
serve to further increase covenant headroom.
Having assessed the relevant business risks as discussed in our
Principal Risks on pages 101-105 and having considered the
potential impact of any climate change related risks as outlined
within the Task Force on Climate-related Financial Disclosures
section on pages 84-91, and in the context of the liquidity and
covenant headroom available under several alternative scenarios as
set out in the viability assessment below, the Directors consider it
appropriate to continue to adopt the going concern basis in
preparing the Financial Statements.
Financing and Liquidity
Net debt (excluding leases) at the 31st December 2023 was £666.7
million (FY 2022: £690.4 million), with a net debt to EBITDA ratio of
1.7x (2022: 1.7x on a reported basis and 1.5x on a proforma basis).
As at the 31st December 2023, total committed and undrawn debt
facilities amounted to £294.5 million alongside a net cash balance
of £212.8 million. In the year, the Group issued €110m of new US
Private Placement notes at a fixed coupon of 4.38% and entered
into a Bank Term Loan of €90m in order to refinance the €225m of
1.05% fixed coupon notes that matured in September 2023. The
average tenor of our debt is over four years with the next
contractual repayment maturity in October 2025. In February 2024,
the Group successfully exercised an option to extend the maturity
of our £400 million committed, revolving credit facility by an
additional year to April 2029.
Fundamentals of financial resilience
The macroenvironment was challenging in 2023 with global
industrial production growth (IP) of 0.3% compared to 2.1% in 2022.
IP was also materially lower than had been forecast at the
beginning of the year (1.4%) with downward revisions to second half
growth particularly marked in North America and China.
Additionally, the Group was impacted by two specific external
challenges in our Pharmaceutical & Biotechnology (Biopharm) and
Semiconductor sectors, due to customer destocking which led to
weaker sales in Watson-Marlow and ETS respectively. Despite this
challenging backdrop the financial results delivered reflect the
relative resilience of our business model. We have continued to
focus on organic growth opportunities led by our direct sales model
delivering engineering solutions for our diversified customer base.
We took early action across all three Businesses to appropriately
right-size capacity and support overhead costs whilst also
protecting our ability to respond to future growth in demand whilst
continuing to invest in key strategic initiatives that will drive future
growth including supporting our decarbonisation solutions and
building additional digital capability. The Group’s longstanding track
record of increasing returns to shareholders has continued with a
proposed year-on-year increase of 5% in ordinary dividends.
The Group’s products and solutions continue to support critical
industrial processes across a broad range of industries and
geographical markets. As in previous years, our business model
supported our outperformance against global IP due to our ability
to self-generate sales (accounting for 40% of sales) and a
significant base business in maintenance and repair sales
(accounting for 45% of sales). These sales are funded from our
customers’ operating budgets. The remaining 15% of sales are
related to large projects, funded from customers’ capital
expenditure budgets, which are more heavily influenced by
economic cycles. Approximately 60% of our sales are to defensive,
less cyclical sectors and no single customer accounts for more than
1% of Group sales.
Resilience over the short, medium and long term
The Group’s business model and the investments we have
continued to make to support future growth, combined with our
strong cash conversion, position us well to adapt to economic
cycles. Our Going Concern and Viability analysis provides
confidence in the robust nature of our business and our capital
structure, even when analysed under a number of potential
downside scenarios.
We have undertaken scenario-based modelling of the key risks we
have identified that could impact our business, the results of which
underpin our confidence in our short and medium-term resilience.
The continued implementation of our strategy supports our
longer-term resilience, and we continue to closely monitor and
respond to the changing external economic, environmental and
social factors that will impact the markets in which we operate in
the future.
Spirax Group Annual Report 2023
41
Strategic Report Financial Review continued
Assessment of Viability
In accordance with provision 31 of the UK Corporate Governance Code 2018, the Board has assessed the viability of the Group, taking into
account the Group’s current financial position, business strategy, the Board’s risk appetite and the potential impacts of the Group’s Principal
Risks. The eight Principal Risks that have been identified are listed on page 101.
The Board has adopted a five-year viability assessment, which it believes to be appropriate as this timeframe is covered by the Group’s
forecasts; takes into account the nature of the Group’s Principal Risks, a number of which are external and have the potential to impact over
short time periods; and is in alignment with the Group’s principal committed financing facility duration. While the Board has no reason to
believe that the Group will not be viable over a longer period, given the inherent uncertainty involved, the Board believes that a five-year
period provides a reasonable degree of confidence while still providing a longer-term perspective.
In making their assessment, the Board completed a robust assessment, supported by detailed cash flow modelling, of the Principal Risks
facing the Group, including those that would threaten its business model, future performance, solvency, or liquidity. In addition to
completing an impact assessment of the Principal Risks, the Board considered the probability of the occurrence of the risks, the Company’s
ability to safeguard against them and the effectiveness of mitigating actions. In every modelled scenario the Group is able to demonstrate
that it continues to remain viable. The scenarios modelled that support this process are as follows.
Scenarios modelled
Scenario 1: Revenue Fall
We considered a combination of scenarios in which future sales were adversely impacted in all years of the
assessment period. The reductions reflected the combined impact of economic political instability on global
Industrial Production output, material foreign exchange rate fluctuations and a loss of output at a significant
Group manufacturing site.
We assumed a reduction of 17% in sales with a margin drop through that is consistent with our base case
scenario and assumed no mitigating actions were taken by the Group. Despite these impacts the Group
continued to trade profitably and always remained comfortably within the financial covenants in the external
financing facilities.
Scenario 2: Exceptional Charge
We considered the impact of a potential large, one-off expense as could be required in the case of a legal or
regulatory fine or a compensation payment. An expense equivalent to 10% of the 2023 Adjusted Group
Operating Profit was assumed alongside a negative impact of 10% on Revenue resulting from the associated
reputational damage. The Revenue fall of 10% occurs in 2024 and recovers over the 5 year period modelled.
Despite these impacts the Group continued to trade profitably and always remained comfortably within the
financial covenants in the external financing facilities.
Scenario 3: Cyber Attack
We considered the occurrence of a cyber-attack that succeeds in severely impacting Group systems. We
assumed an immediate disruption to trading followed by a fall in sales in subsequent years resulting from the
associated negative reputational impact, the combined effect being a loss of 5% of sales in each year over the
5 year period. A significant initial cost of around 7% of the 2023 Adjusted Group Operating Profit was also
included to rectify the immediate impact of the attack followed by increased investment in all subsequent years
to strengthen our cyber-security.
Despite these impacts the Group continued to trade profitably and always remained comfortably within the
financial covenants in the external financing facilities.
Scenario 4: Acquisition Failure
We considered a scenario whereby recent acquisitions (within the ETS Business) fail to achieve the financial
targets contained within the acquisition business case. We assumed a 20% shortfall in sales in the acquired
business and that they were disposed of for a lower cash consideration than the original consideration.
Despite these impacts the Group continued to trade profitably and remained comfortably within the financial
covenants in the external financing facilities.
Links to Principal Risks
Risk 1: Economic and political
instability
Risk 2: Significant exchange
rate movement
Risk 5: Loss of manufacturing
output at any Group
factory
Risk 6: Inability to identify or
respond to changes in
customer needs
Risk 7: Loss of critical supplier
Risk 8: Breach of legal and
regulatory
requirements
(including ABC laws)
Risk 3: Cybersecurity
Risk 4: Failure to realise
acquisition objectives
A further scenario was modelled to ascertain what level of revenue or adjusted profit margin reduction would be required to cause a breach
of the Group’s debt covenants. The reductions in revenue and adjusted profit margin required to breach Group’s debt covenants were in
excess of 17% within a 12 month period, significantly higher than those modelled in the above scenarios and greater than the impact
experienced during the severe global economic downturn in 2009. This scenario assumed no mitigating actions were taken. Mitigating
actions available could include reductions in operating and capital expenditure and shareholder dividends.
42
Spirax Group Annual Report 2023
Strategic Report During the year the Group worked alongside a third-party specialist
to undertake detailed financial modelling in order to determine the
potential financial impact of increasing global temperatures on our
business operations. The analysis concluded that the potential level
of financial risk to the Group was lower than the impacts modelled
in the Revenue Fall scenario included. As a result, no specific
climate change impact scenario has been included.
Outlook and 2024 guidance
CHR Economics’ forecast for 2024 IP has reduced materially from
the 2.6% expected in October 2023 to 1.7% currently, with growth
weighted towards the second half (H1: 1.2%; H2: 2.1%). Against a
backdrop of geopolitical unrest and continuing macroeconomic
uncertainty, we remain cautious about the outlook for IP in 2024,
particularly the forecast improvement in the second half.
Whilst linked to the Group’s Principal Risks, the scenarios modelled
are hypothetical and designed to test the ability of the Group to
withstand such severe outcomes. In practice, the Group has an
established series of risk control measures in place that are
designed to both prevent and mitigate the impact of such risks.
The results of the stress testing undertaken illustrate that the Group
would be able to absorb the impact of the scenarios considered
should they occur within the assessment time period. In all the
scenarios considered the Group was not required to implement
any potential mitigating actions in order to remain within its debt
covenants.
Viability statement
Based on the outcomes of the scenarios and considering the
Group’s financial position, strategic plans and Principal Risks, the
Directors have a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due over
the period of their assessment. The Directors’ statement regarding
the adoption of the going concern basis for the preparation of the
Financial Statements can be found on page 41.
If exchange rates at the end of February were to prevail for the
remainder of the year, there would be a headwind impact of
approximately 3% to 2023 sales and approximately 5% to 2023
adjusted operating profit.
In 2024, we anticipate mid to high-single-digit organic growth in
Group revenues and low double-digit organic growth in Group
adjusted operating profit, supported by our proven ability to grow
ahead of IP and increased Biopharm and Semicon demand in the
latter part of the year.
After absorbing the exchange rate headwinds outlined above, we
expect modest progress in the Group adjusted operating profit
margin compared to the 20.7% achieved in 2023. Adjusted
operating profit in 2024 will be more second half weighted than
usual, reflecting: exchange rate headwinds; the reversal of cost
containment measures in the first half; and strong demand growth
in the second half.
We anticipate adjusted cash conversion of approximately 75% in
2024 with capital expenditure as a proportion of sales of
approximately 7%.
Long-term resilience
The Group has a long track record, over 135 years, of consistently
adapting to changing macroeconomic, environmental and social
factors supported by our business model. While our strategy and
business model lessen any material impact from our Principal Risk
factors, we nevertheless continuously review our markets, listen to
our customers and adapt our solutions, while working responsibly
and in line with our Values to build long-term sustainability.
The Group has a highly resilient business and strategy that will
remain relevant across different climate related scenarios.
We recognise the need to anticipate and mitigate the impact of
climate-related change. In 2021 we launched our One Planet:
Engineering with Purpose Sustainability Strategy covered in
more detail on pages 60 to 97. Although not classed as a Principal
Risk for our Group, the TCFD disclosures on pages 84 to 91 detail
the anticipated impact of climate-change related change on the
Group’s longer-term resilience.
The increasing commitments to net zero targets will have a
profound effect on industrial activity over the coming decades and
is an additional source of growth for our Group over at least the
next 30 years. To address the opportunities arising from the
decarbonisation of industrial processes, we have invested
significantly in the development of sustainable products and
solutions that help customers meet their own sustainability goals.
Medium-long term
Over the last decade we have evolved to become a highly
differentiated specialist engineering Group of three complementary
Businesses with strong capabilities in high value niche markets. Our
products and solutions are critical to the operating efficiency and
safety of our customers’ industrial processes and increasingly, their
sustainability goals. Our business model and strategy have
delivered a track record of growing organically ahead of IP and
industry-leading margins. Leveraging this uniquely differentiated
business model to take advantage of the significant opportunities
we have in long-term growth markets such as thermal efficiency,
fluid path technology and decarbonisation, will enable us to
continue delivering sustainable compounding growth at attractive
margins over the coming years.
Phil Scott
Interim Chief Financial Officer
6th March 2024
Spirax Group Annual Report 2023
43
Strategic Report Ten-year financial summary
Our financial performance demonstrates a strong
trajectory of growth and shareholder value creation.
Revenue
Operating profit
2014
£m
2015
£m
2016
£m
2017
£m
2018
£m
2019
£m
2020
£m
2021
£m
2022
£m
2023
£m
678.3
667.2
757.4
998.7
1,153.3 1,242.4 1,193.4
1,344.5
1,610.6 1,682.6
148.1
142.8
174.1
198.9
299.1
245.0
249.0
320.9
318.8
284.4
Adjusted operating profit*
153.0
152.4
180.6
235.5
264.9
282.7
270.4
340.3
380.2
349.1
Adjusted operating profit margin*
22.5% 22.8% 23.8% 23.6% 23.0% 22.8% 22.7%
25.3% 23.6% 20.7%
Profit before taxation
144.8
139.7
171.4
192.5
288.8
236.8
240.1
314.5
308.1
244.5
Adjusted profit before taxation*
Profit after taxation
151.1
100.6
151.1
96.7
177.9
229.1
254.6
274.5
261.5
333.9
370.6
309.2
121.3
157.9
223.4
167.0
173.9
234.9
225.0
184.0
Adjusted cash from operations
131.5
146.2
185.0
203.8
242.9
238.1
275.8
279.0
214.9
281.7
Cash conversion
85.9% 95.9% 102.4% 86.5%
91.7% 84.2% 102.0%
82.0% 56.5% 80.7%
Capital expenditure to sales††
5.0%
5.0%
5.7%
3.8%
3.8%
5.0%
4.2%
4.8%
7.3%
6.3%
Basic earnings per share
132.8p
129.9p
165.0p 214.4p
303.1p 226.2p 235.5p
318.3p
305.1p
249.5
Adjusted earnings per share*
140.4p
142.6p
171.5p 220.5p 250.0p 265.7p 256.6p
338.9p 377.2p 312.4p
Dividends in respect of the year
139.9
50.6
55.8
64.4
73.6
81.1
87.0
100.2
112.0
117.8
Dividends in respect of the year
(per share)
64.5p
69.0p
76.0p
87.5p
100.0p
110.0p 118.0p
136.0p
152.0p 160.0p
Special dividend (per share)
120.0p
—
—
—
—
—
—
—
—
—
Net assets
441.9
398.3
524.4
609.5
766.9
826.3 852.3 ** 1,010.0
1,169.8
1,157.7
Return on capital employed†
41.4%
41.1% 44.8% 49.8%
51.6% 52.5% 48.9% ** 59.3% 53.3% 41.6%
Return on invested capital†
27.4%
27.1% 28.7% 22.6%
19.3%
19.0% 17.8% ** 22.9%
19.0% 14.0%
* All adjusted profit measures exclude certain items as set out and explained in the Financial Review and in the Appendix to the Financial Statements
** 2020 has been restated following the IFRS Interpretations Committee agenda decision on configuration and customisation costs in cloud
computing arrangements (Software as a Service (SaaS)), see Note 1 to the Financial Statements for further details
† The results for 2019 to 2023 exclude the impacts of IFRS 16, which was adopted in 2019
†† Capital expenditure excludes IFRS 16 Lease repayments
44
Spirax Group Annual Report 2023
Strategic Report Revenue and adjusted operating profit margin £m/%
Dividends and adjusted earnings per share p
i
%
n
g
r
a
m
t
i
f
o
r
P
30
28
26
24
22
20
18
16
14
12
10
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
m
£
e
u
n
e
v
e
R
e
r
a
h
s
/
p
400
320
240
160
80
0
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
Sales
Adjusted operating profit margin
DPS
EPS
Special dividend
Return on capital employed and return on invested capital %
60
50
40
30
20
10
i
%
n
g
r
a
m
t
i
f
o
r
P
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
ROCE
ROIC
* All adjusted profit measures exclude certain items as set out and explained in the Financial Review and in the Appendix to the Financial Statements
** 2020 has been restated following the IFRS Interpretations Committee agenda decision on configuration and customisation costs in cloud
computing arrangements (Software as a Service (SaaS))
† The results for 2019 to 2023 exclude the impacts of IFRS 16, which was adopted in 2019
†† Capital expenditure excludes lease repayments
Spirax Group Annual Report 2023
45
Strategic Report
Strategic Report
Operating Review
Steam Thermal Solutions
We have continued to expand our
addressable market through the
development of new solutions,
targeting high growth sectors.”
Maurizio Preziosa
Managing Director, Steam Thermal Solutions
Steam Thermal Solutions at a glance
(at year end)
61
operating units+
65
countries with a resident
direct sales presence
5,200+
colleagues
2022
Exchange
Organic
Acquisitions &
disposals *
2023
Organic
Reported
Revenue
Adjusted operating profit
Adjusted operating profit margin
Statutory operating profit
Statutory operating profit margin
866.0
206.1
23.8%
196.2
22.7%
+ Operating units are business units that invoice locally
(25.1)
(11.3)
70.5
29.3
(1.3)
(0.1)
910.1
224.0
+8%
+15%
+5%
+9%
24.6%
+140bps
+80bps
205.2
22.5%
+5%
-20bps
* Results include the impact of the treatment of our Russian operating companies as disposals from the date at which the Group suspended all
trading with and within Russia
46
Spirax Group Annual Report 2023
Strategic Report Revenue (£)
£910.1m
2023
2022
2021
2020
2019
Reported
+5%
910.1
866.0
754.9
694.1
755.4
Organic
+8%
2023 Group
Revenue
54%
2022: 54%
Adjusted operating profit (£)
£224.0m
2023
2022
2021
2020
2019
Reported
+9%
224.0
206.1
188.7
154.3
177.9
Organic
+15%
Adjusted operating profit
margin (%)
24.6%
2022: 23.8%
Reported
+ 80 bps + 140 bps
Organic
Statutory operating profit
margin (%)
22.5%
Key Industries
Statutory operating profit (£)
Food & Beverage
OEM Machinery
Pharmaceutical & Biotechnology
Chemicals
£205.2m
2023
2022
2021
2020
2019
Reported
+5%
205.2
196.2
186.8
157.8
172.6
STS delivered organic sales growth of 8%,
which was significantly ahead of IP across all
regions, despite a challenging macroeconomic
outlook that weakened progressively through
the year and particularly during the second
half. Strong first half growth of 15% moderated
to 2% in the second half driven by weaker IP in
China and Germany, together with a slowdown
in large orders compared to the first half.
Against this backdrop we implemented temporary cost
containment measures while preserving investment and
momentum in key growth initiatives (direct sales
effectiveness, digital connected products and services, and
decarbonisation solutions). As a result, full year adjusted
operating profit of £224 million grew by 15% organically,
with adjusted operating profit margin up 140 bps organically,
reflecting price and cost discipline. Second half adjusted
operating profit margin was slightly higher than in the first
half of 2023 and the second half of 2022.
STS has both sales and manufacturing operations in
Argentina, representing less than 1.5% of Group sales in
2023. Current levels of inflation and the extreme volatility in
the Argentine peso exchange rate, as demonstrated by the
large devaluation in December 2023, have created
challenging operating conditions. While our local operating
company prices with reference to the US dollar to protect
against operating profit margin erosion, the Group’s ability
to repatriate cash generated in Argentina is currently
limited. As a result, we are limiting inward investment into
our Argentinian operations.
Statutory operating profit of £205.2 million was up 5% from
£196.2 million in 2022 and the statutory operating profit
margin of 22.5% decreased by 20 bps.
Since 2018, STS has been engaged in a project to upgrade
its ERP systems, known as Project OPAL. Over time, the
scope of the project has expanded substantially to include a
wider range of business applications. In parallel, the
external technology market has continued to evolve and the
Group has also taken the decision to implement consistent
ERP solutions across all three Businesses. Within STS, this
will enhance future capability, in addition to leveraging the
scale of the broader Group. This has resulted an impairment
charge to statutory operating profit of £13.9 million in
relation to existing assets which will no longer provide
future economic benefit.
Operating highlights
We launched our ‘TargetZero’ solutions in November 2022,
to support the decarbonisation of industrial steam
generation, and the first installation of ‘ElectroFit’ was
completed during 2023 for Diageo in Turkey. Interest in
these solutions continues to strengthen and
decarbonisation remains a key long-term growth
opportunity for STS, working in collaboration with ETS.
However, the rate of adoption will depend on several factors
including: the development of local infrastructure for the
generation and transmission of electricity; the comparative
cost of natural gas and electricity impacting operating costs
as a result of decarbonisation; and customer ambition in
achieving net zero greenhouse gas emissions, as well as
their willingness to invest behind delivery of their targets.
Spirax Group Annual Report 2023
47
Strategic Report
Operating Review continued
As an industry leader, STS organised and chaired the first
‘Sustainable Steam Symposium’ in 2023 at Brunel University.
This Symposium was centred around the latest
developments in research, technology trials and pilot
projects within the steam and thermal solutions industry,
with a focus on the decarbonisation of steam generation
and energy-saving innovations.
Throughout the year we have continued to develop new
digitally enhanced customer solutions that extend our
expertise beyond the onsite services provided by our field
engineers. We saw a doubling in the number of connected
customer sites, an increase in the number of reports
generated for customers and strong sales of incremental
products and services attributed directly to digital
connections. By driving adoption of digital connections and
developing our direct sales capability to deliver solutions
based on richer data and additional insights, we believe we
are laying strong foundations for further digitally enabled
growth in STS.
STS has continued to expand its addressable market
through the development of new solutions, targeting high
growth sectors. For example, STS delivered exceptional
growth in the lithium-ion battery sector in 2023, particularly
in Asia Pacific, where we now have over 100 customers.
In line with our strategy of continuing to develop our local
presence, in August 2023 Gestra acquired a distributor in
Kuala Lumpur, Malaysia. This acquisition has expanded our
local direct sales team as well as our customer base
allowing us to further implement our business model
focused on solution-selling and self-generated sales.
2024 outlook
We anticipate mid-single-digit organic sales growth in STS.
Adjusted operating profit margin is expected to be lower
than in 2023, reflecting exchange rate headwinds, the
reversal of 2023 cost containment measures and increased
revenue investments to support future growth.
48
Spirax Group Annual Report 2023
Strategic Report Steam Thermal Solutions
Finding the right
‘whey’ for cheese
producer
As part of our Customer first2 strategy,
our engineers focus on direct
engagement to build strong customer
relationships as well as a deep
understanding of our customers’ needs
to create value-adding solutions.
‘Walking the Plant’ is one of the most important
ways in which our direct sales engineers can add
value to our customers by identifying potential
problems and finding solutions. For our customer
Saputo, a bulk cheese and whey producer, a visit
from direct sales engineer Travis Berry helped
identify important efficiency and sustainability
improvements, which have led to annual savings of
around US$700,000.
At its dairy plant in California, Saputo has three
clean-in-place kitchen areas each producing
condensate from heat exchangers which was going
to waste, losing valuable heat. Spirax Sarco
designed a solution to recover and return the
condensate to the steam generating boiler,
improving efficiency and sustainability.
The new condensate recovery system has delivered
quantified energy, water and CO2 savings since its
installation, as well as reducing safety risks and the
amount of boiler chemicals needed to treat the fresh
water. It is estimated that the site will save 3,150
tons of CO2 per year and the equivalent of 33
Olympic-sized swimming pools of water being saved
each year.
Due to the success of the project, the solution will
now be replicated at the customer’s other sites
across the USA and Canada.
3,150 tons
of CO2 saved per year
33
Olympic-sized swimming pools of water saved each
year
US$700k
annual running cost savings
Spirax Group Annual Report 2023
49
Strategic Report Operating Review continued
Electric Thermal Solutions
We have continued to see strong
customer demand for our
decarbonisation solutions leading
to record order books within ETS.”
Armando R Pazos
President, Electric Thermal Solutions
Electric Thermal Solutions at a glance
(at year end)
36
operating units+
20
countries with a resident
direct sales presence
2,610+
colleagues
2022
Exchange
Organic
Acquisitions &
disposals *
2023
Organic
Reported
Revenue
Adjusted operating profit
Adjusted operating profit margin
Statutory operating profit
Statutory operating profit margin
256.1
39.9
15.6%
7.3
2.9%
0.3
(1.0)
4.1
(1.7)
118.0
22.0
378.5
59.2
15.6%
25.8
6.8%
+2%
-4%
-90bps
+48%
+48%
+0bps
+253%
+390bps
+ Operating units are business units that invoice locally
* Results include the impact of the acquisitions of Vulcanic and Durex Industries
50
Spirax Group Annual Report 2023
Strategic Report Revenue (£)
£378.5m
378.5
256.1
2023
2022
2021
2020
2019
181.3
178.0
186.1
Reported
Organic
+48% +2%
Adjusted operating profit
margin (%)
15.6%
2022: 15.6%
Reported
Organic
+0 bps -90 bps
Statutory operating profit
margin (%)
6.8%
2023 Group
Revenue
23%
2022: 16%
Adjusted operating profit (£)
£59.2m
59.2
39.9
2023
2022
2021
2020
2019
24.0
24.6
24.7
Reported
+48%
Organic
-4%
Key Industries
Statutory operating profit (£)
Power Generation
Semiconductor
Oil & Gas
Food & Beverage
25.8
£25.8m
2023
2022
2021
7.3
11.1
2020
4.8
2019
7.9
Reported
+253%
While IP remains a key underlying driver of
growth in ETS, secular trends in the
decarbonisation and Semicon markets are
important additional drivers. As expected,
Semicon (18% of ETS proforma sales in 2022)
sector demand remained weak through 2023,
driven by customer destocking. Both Durex
Industries and to a lesser extent Thermocoax
(that focus on industrial equipment heating
solutions) were impacted by slowing Semicon
demand.
Demand growth in Chromalox and Vulcanic (that focus on
industrial process heating solutions) was significantly ahead
of IP. Growth was strongest in strategically important
sectors such as Energy Transition, which includes
decarbonisation solutions, leading to a significantly
enhanced order book.
ETS sales were up 48% reflecting the contribution from the
acquisitions of Vulcanic and Durex Industries. Excluding this
contribution, sales were up 2% organically (H1: up 7%; H2:
down 2%), reflecting growth in Chromalox but lower
Semicon demand impacting Thermocoax sales, particularly
in the second half.
Chromalox’s manufacturing facility in Ogden, Utah (USA)
continued to implement operational improvements aimed at
increasing throughput but sales lagged the even stronger
growth in demand for bespoke solutions that deliver
decarbonisation benefits. We remain focused on delivering
higher sales from Ogden while also completing the facility
expansion. On a proforma basis, the combined sales of
Vulcanic and Durex Industries were down 6%, compared to
2022, with strong growth at Vulcanic offset by lower sales at
Durex Industries, which was impacted by lower Semicon
demand.
ETS adjusted operating profit was up 48% due to the
contribution from the acquisitions of Vulcanic and Durex
Industries. Excluding the acquisitions, adjusted operating
profit was broadly flat, compared to 2022, with adjusted
operating profit margin impacted by continued investments
in operational improvements in Chromalox and weaker
growth in higher margin Thermocoax. Chromalox and
Thermocoax combined adjusted operating profit margin in
the second half of 2023 was above both the first half of the
year and the second half of 2022.
On a proforma basis, the combined adjusted operating profit
margin of the acquisitions was down year-on-year, driven by
the impact of lower Semicon demand on Durex Industries,
as well as investments in safety, systems and processes to
more closely align the acquisitions with the Group’s
operating standards. The benefit of early cost actions taken
at Durex Industries helped to mitigate the margin decline.
Excluding onboarding costs, Vulcanic adjusted operating
profit margin in 2023 was higher, compared to 2022.
ETS statutory operating profit was up 253% compared to
2022, reflecting restructuring charges relating to Chromalox
EMEA that impacted the 2022 result, with the statutory
operating profit margin of 6.8% up 390 bps.
Operating highlights
The integration of Vulcanic and Durex Industries, one of
ETS’s key priorities in 2023, continued to progress well with
high levels of collaboration between the Chromalox and
Vulcanic teams in areas such as sales training, deployment
of pricing tools and new product development. Our dual
brand strategy is being implemented in Vulcanic and
Chromalox with particular benefits seen for customers in
Spirax Group Annual Report 2023
51
Strategic Report
Operating Review continued
EMEA, as we migrated manufacturing of Chromalox
products to Vulcanic sites in France and Spain following the
closure of Chromalox’s Soissons (France) site in 2022. ETS
also completed a site rationalisation between Thermocoax
and Durex Industries with the transfer of production from
our Alpharetta, Georgia (USA) facility to Carey, Illinois (USA).
Good progress continues to be made on improving safety
and sustainability in line with Group operating standards.
Chromalox and Vulcanic have continued to drive growth in
their target sectors, particularly focused on the industrial
electrification opportunity, which has resulted in a
significant increase in the ETS order book. During 2023,
Chromalox supported Tesla with the development of its
Cyber Truck manufacturing facility in San Antonio, Texas
(USA).
In October, ETS began construction of an expansion to
Chromalox’s manufacturing site in Ogden, Utah (USA),
which will be dedicated to Medium Voltage heating
solutions. The US$58 million expansion is expected to be
completed towards the end of 2024, with production
ramping-up in 2025. In support of our commitment to
sustainability, the facility will install ground source heat
pump systems to efficiently heat and cool the facility with
renewable energy. In addition, Chromalox’s manufacturing
facility in Nuevo Laredo (Mexico) completed a second solar
panel system installation, which will lead to significant
energy savings and emissions reductions.
2024 outlook
We anticipate high-single-digit organic sales growth in ETS
supported by a return to demand growth in Semicon.
Adjusted operating profit margin progress will be supported
by improved operational performance and higher Semicon
revenues, partly offset by onboarding costs in Vulcanic and
Durex Industries, as well as pre-production costs for the
expanded Ogden facility.
52
Spirax Group Annual Report 2023
Strategic Report Electric Thermal Solutions
Powering battery
production from
sustainable steam
A Sino-Japanese battery manufacturer
turned to an industrial boiler specialist,
alongside Vulcanic, part of Electric
Thermal Solutions, to help it achieve
sustainable steam generation for the
production of electric vehicle (EV)
batteries.
The battery manufacturer is committed to operating
responsibly and wants to ensure that EV production
from its new European manufacturing facility has
minimal impact on the environment. As a result, the
generation of steam for its manufacturing processes
needs to be decarbonised.
The two companies combined their expertise to
provide a complete end-to-end package which
features Vulcanic’s proprietary low voltage heating
solutions to generate steam without the burning of
fossil fuels. The solution is safe, easy to maintain and
when it’s connected to green or renewable electricity
sources eliminates scope 1 and 2 greenhouse gas
emissions.
The overall power of low carbon EV batteries
produced by the new site will increase from 9 GWh in
2024 to 24 GWh by 2030.
20
MW total electrical power capacity from low voltage
heating solution for steam generation
24
GWh of low carbon EV batteries produced from
decarbonised steam generation
by 2030
Spirax Group Annual Report 2023
53
Strategic Report Operating Review continued
Watson-Marlow
Fluid Technology Solutions
While destocking in the Biopharm
sector impacted 2023 trading,
underlying demand remains strong
and we are well positioned for a
return to growth.”
Andrew Mines
Managing Director, Watson-Marlow Fluid Technology Solutions
Watson-Marlow Fluid Technology
Solutions at a glance
(at year end)
47
operating units+
42
countries with a resident
direct sales presence
1,960+
colleagues
2022
Exchange
Organic
Acquisitions &
disposals *
2023
Organic
Reported
Revenue
Adjusted operating profit
Adjusted operating profit margin
Statutory operating profit
Statutory operating profit margin
488.5
160.0
32.8%
154.4
31.6%
+ Operating units are business units that invoice locally
(2.4)
5.2
(90.6)
(71.5)
(1.5)
—
394.0
93.7
-19%
-43%
-19%
-41%
23.8% -1,030bps
-900bps
81.2
20.6%
-47%
-1,100bps
* Results include the impact of the treatment of our Russian operating companies as disposals from the date at which the Group suspended all
trading with and within Russia
54
Spirax Group Annual Report 2023
Strategic Report Revenue (£)
£394.0m
2023
2022
2021
2020
2019
394.0
408.3
488.5
321.3
300.9
Reported
-19%
Organic
-19%
2023 Group
Revenue
23%
2022: 30%
Adjusted operating profit (£)
£93.7m
2023
2022
2021
2020
2019
160.0
150.0
93.7
107.3
95.8
Reported
-41%
Organic
-43%
Adjusted operating profit
margin (%)
23.8%
2022: 32.8%
Reported
-900 bps -1,030 bps
Organic
Statutory operating profit
margin (%)
20.6%
Key Industries
Statutory operating profit (£)
Pharmaceutical & Biotechnology
Food & Beverage
Water & Wastewater
Healthcare
£81.2m
154.4
145.4
81.2
102.2
82.7
2023
2022
2021
2020
2019
Reported
-47%
Watson-Marlow’s trading continued to be
impacted by customer destocking activity in
the Biopharm sector throughout the year.
Underlying demand remains strong, with
Biopharm end-markets continuing to grow at
the pre-pandemic rate of over 10% per annum.
However, it became clear through 2023 that
this demand would continue to be satisfied by
excess inventory built up during the peak of
the COVID pandemic. In Watson-Marlow this
has resulted in Biopharm monthly sales
remaining broadly flat throughout 2023.
Watson-Marlow sales declined by 19% organically,
compared to 2022. Biopharm sales (which accounted for
approximately 60% of Watson-Marlow sales in 2022)
declined by close to 30% organically. The organic decline in
Biopharm sales was larger in the first half than in the second
half due to a more challenging comparator, with customer
destocking having materially started in the second half of
2022.
Supported by the continued strong growth in Biopharm
end-markets, we anticipate a return to sales growth during
2024. As evidenced by market commentary from a number
of larger Biopharm OEMs, which are our customers, the
precise timing and scale of the recovery remains
challenging to predict with a wide range of views spanning
from a recovery in the second half of 2024, through to
recovery being delayed into 2025.
Sales to Process Industries customers, which are more
directly correlated to IP, were broadly flat in the first half,
compared to 2022. In the second half of 2023, Process
Industries demand growth was impacted by the weakening
macroeconomic outlook, with sales broadly similar to the
first half. Process Industries sales also remained
significantly ahead of pre-pandemic levels.
The benefits of early actions to address the weaker trading
environment were realised in the second half of the year,
mitigating the impact of lower sales on adjusted operating
profit. While the adjusted operating profit margin declined
by 1,030 bps organically, to 23.8%, the second half margin
was impacted by a one-off charge in respect of excess
Biopharm inventory.
Statutory operating profit was down 47% compared to 2022,
while statutory operating profit margin was down 1,100 bps,
reflecting costs of £9.3 million to appropriately right-size
manufacturing capacity and reduce overhead support
costs.
Operating highlights
Against a backdrop of challenging trading conditions, we
took steps to offset the adverse impact of lower sales
volumes on profitability. While most of the right-sizing was
focused on UK and EMEA manufacturing operations,
Watson-Marlow also closed its Flowsmart site in Delaware
(USA) and transferred manufacturing to its newly built
facility in Devens, Massachusetts (USA).
Restructuring and cost actions continued to be
implemented during the second half, balancing the need to
protect margins with maintaining business-readiness for an
anticipated return to volume growth in 2024. In this context,
we also continued to invest in developing new products and
services.
Watson-Marlow began incorporating ISO 13485, a quality
management system covering the design and manufacture
of medical devices, into its product development process
Spirax Group Annual Report 2023
55
Strategic Report Operating Review continued
from October 2023. This is expected to become a
requirement for products sold into cell and gene therapy
markets.
Also in Biopharm, Watson-Marlow developed ‘DriveSure’ – a
digitally enabled, pre-configurable pump and drive unit that
can be customised for small spaces; and further developed
its unique ‘PureSU’ (Pure Single-Use) assembly offering,
which represents a powerful example of tailored customer
solutions by providing customised connectivity for the fluid
path between disparate pieces of end-user equipment.
Watson-Marlow continued to expand its addressable market
in Process Industries by developing solutions for new and
emerging sectors. Cell-based meat has been identified as a
high potential area of future growth and Watson Marlow
Germany is working with ‘Cultivated B’, the first company in
the EU to apply for certification for its product. This initiative
ties into Watson-Marlow’s existing Future Foods focus
where sales into precision fermented food manufacturers
have more than doubled since 2021.
The Electric Vehicle (EV) battery market is another focus
sector, especially for Watson-Marlow’s Bredel product
range. A key process step in EV battery manufacture is the
production of the Nickel, Cobalt, Manganese (NCM) Ternary
Precursors used in EV battery cathodes. Peristaltic hose
pumps are the ideal technology for mixing and transferring
these chemical slurries, which are vital to scale up EV
battery production to meet global demand. The C42 Bredel
pump has been developed to meet the specific
technological needs of this sector.
2024 outlook
We anticipate high-single-digit organic sales growth
supported by a return to growth in Biopharm demand in the
latter part of the year, albeit there are a variety of views
within the industry on the timing and scale of this recovery.
This sales growth is expected to deliver a strong
improvement in adjusted operating profit margin after
absorbing the reversal of 2023 cost containment measures
and an increase in variable compensation.
56
Spirax Group Annual Report 2023
Strategic Report Watson-Marlow
Fluid Technology Solutions
Peristaltic technology
keeps hearts pumping
Cardiac ablation is an important medical procedure for
the treatment of certain heart conditions. When
medical device manufacturers livetec Ingenieurbüro
GmbH and OSYPKA were looking for a reliable and
easy-to-operate peristaltic pump for use in surgical
ablation systems they turned to Watson-Marlow Fluid
Technology Solutions.
Any malfunction of the pump would lead to a
discontinuation of the ablation treatment. After
putting a number of other peristaltic pumps through a
series of tests, they were unable to find another that
matched or exceeded the delivery rates and
compatibility of the Watson-Marlow pump.
Ablation treatments usually take several hours
and the pump must provide saline solution
continuously during this time, so absolute
reliability of all components is essential and was
a fundamental requirement in our decision-
making process.
The Watson-Marlow pump is easy to operate
and has proven capability to handle the high back
pressure caused by very narrow catheter channels
with a very small diameter (lumen) in the
micrometer range. We are able to control the flow
rate precisely at any time so that the exact volume
flow required for each treatment step is achieved.
The peristaltic pump is one of the central
components in the system and must provide
absolute reliability over several years and many
treatments. The ablation systems from livetec
and OSYPKA have been on the market for more
than five years, with several hundred devices
in use. Until now, there have been no
complaints due to wear of a pump. All are still
working smoothly.”
Michael Schirmeier
Managing Director at livetec
Reduced
risk of human error
100%
reliability of continuous flow of saline solution.
Zero pump failures
after five years and hundreds of pumps installed
Spirax Group Annual Report 2023
57
Strategic Report Our customers
Developing solutions for
future customer needs
Strengthening customer bonding
through connected environments
Across Spirax Group we are developing digital
solutions that augment our physical customer
closeness through ‘walk the plant’ activities,
with digital connections that generate real-time,
predictive insights that also enable us to ‘walk
the data’ adding value to our customers
through anticipating and detecting critical
equipment failures.
Digital specialists at our Fluid Technology
Solutions Business, Watson-Marlow, are using
machine learning techniques to identify potential
pump and tubing failures. By training AI models
in what normal operation looks like and then
feeding it data points common with pump and
tubing failures, our technology has been able
to correctly predict failure in 90% of cases
during lab testing at our R&D facility in
Falmouth (UK).
Meanwhile in Germany, Steam Thermal Solutions
specialist Gestra has developed a wireless
steam trap monitoring solution utilising the
Group’s STRATA technology and combining it
with Gestra Ecobolt sensors to detect broken
or leaky steam traps. This enables customers
to replace steam traps in an expedient manner,
saving energy and improving efficiency.
58
Spirax Group Annual Report 2023
Our aim is to support current
predictive maintenance
processes with AI to get the
maximum product life by giving
our customers the insights they
need to plan maintenance and
only replace parts that need
replacing, rather than replacing
them due to length of operation.”
Matthew Thomas
Head of Digital, Watson-Marlow Fluid
Technology Solutions
We are working with a fertiliser
chemical company in Spain to
help improve the operational
efficiency of its steam trap
population. Once the project is
complete, we estimate that we
will save the customer 173,000
MWh of energy and 4,700 tonnes
of CO2. That’s the equivalent
average annual energy
consumption of more than 2,000
people and over 200,000 mature
trees absorbing CO2.”
Jayesh Chavda
Business Development Manager –
Connected Services, Gestra, part of
Steam Thermal Solutions
Strategic Report Spirax Group Annual Report 2023
59
Strategic Report Strategic Report
Strategic Report
Sustainability Report
One Planet is the mechanism
through which our Group
delivers sustainable
improvements that
support people
and planet
Our six strategic initiatives are
helping us deliver climate and
environmental action, customer
sustainability, resilient supply
chains and stronger communities.
Read more about our
responsible business
foundations on pages 62 to
69
Read more about how we
delivered on our strategic
initiatives in 2023 on pages
70 to 81
60
Spirax Group Annual Report 2023
2023 was a year of good progress as we further
improved the environmental performance of the
Group and delivered value to our communities.”
Sarah Peers
Group Director of Sustainability
Our One Planet: Engineering with Purpose Sustainability
Strategy sets out our plans for building a more sustainable
future and our commitment to having a positive impact on
people and planet. Now in its third year, the strategy is well
embedded across the Group and we are making good
progress towards achieving our goals for sustainable
business operations.
Our Strategy
Our One Planet Sustainability Strategy is implemented by
each of our three Businesses, with central oversight from
our Group Executive Committee.
The strategy is delivered through six strategic initiatives,
which are:
Science-Based Targets initiative
A key achievement in 2023 was the validation of our net
zero targets by the Science-Based Targets initiative (SBTi).
This is a collaboration between the United Nations Global
Compact (UNGC), the World Resources Institute (WRI), the
Carbon Disclosure Project (CDP) and the Worldwide Fund
for Nature (WWF). It helps companies to set ambitious and
credible climate targets that are based on the best available
science and the needs of the planet.
We committed to establishing science-based targets during
2021, as part of our wider commitment to take action on
climate change and reduce our environmental impacts. In
2022, we submitted our near-term and long-term
decarbonisation targets to the SBTi for validation and they
were approved in November 2023. This acknowledges the
credibility of our decarbonisation plans both in our
operations and in our value chain.
As disclosed in our 2022 Annual Report, the majority of our
total emissions are scope 3 emissions and are associated
with the energy in use of our Electric Thermal Solutions
(ETS) products. These products are designed to replace
fossil-fuel systems and therefore aid decarbonisation for
our customers when supplied with green electricity. To
reduce the calculated emissions associated with these
products and to meet our own decarbonisation goals, we
are reliant on the electricity grids in the countries where we
have customers transitioning to green electricity. Read
about the future of sustainable steam on pages 92-93.
Responsible business foundations
Our responsible business foundations underpin the way in
which we operate, providing the basis for our Group’s ethics
and social reponsibility to integrate with sustainability and
shape our business practices. These are:
Health and safety
People and wellbeing
Inclusion and diversity
Ethical business
1. Achieve net zero greenhouse gas emissions
See pages 72–75
2. Deliver biodiversity net gain
See page 76
3. Implement environmental improvements in
our operations
See pages 77–78
4. Grow sales of products with quantified
sustainability benefits
See page 79
5. Embed sustainability criteria in supply chain
management
See pages 80
6. Support the wellbeing of people in our
communities
See page 81
Additionally, the Sustainability Strategy is supported by a
strategic project to improve the availability and quality of
sustainability data. A previous strategic project to develop
our colleagues’ sustainability knowledge achieved the
objectives it set out when the strategy was launched. It was
formally retired as a strategic project in 2023 as
sustainability knowledge is now embedded within standard
operations across the Group.
Double materiality assessment
To support our ongoing monitoring of sustainability and to
prepare for future regulatory reporting requirements, we
conducted a Double Materiality Assessment (DMA) in 2023.
This process involved assessing the impact of sustainability
topics on the Group and also assessing the impact that the
Group can have on people and planet in regard to these
topics. We conducted interviews and workshops with a wide
range of internal and external stakeholders, including senior
leadership, colleagues, customers, suppliers, community
stakeholders and investors, to complete this DMA.
Spirax Group Annual Report 2023
61
Strategic Report Sustainability Report: Responsible business foundations
Health and Safety
Completion of Group H&S Excellence
Framework (Foundation level) in 2023
%
Serious Lost Time Accident Rate*
All-Workplace Injury Rate*
Legacy
sites
Vulcanic
Durex
Industries
99.9
58
64
2023
2022
2021
2020
0.05
0.10
0.04
0.04
0.08
2023
2022
2021
2020
2019
1.55
2.24
1.75
2.22
2.62
3.44
* Excluding 2022 acquisitions
* Per 100,000 hours worked
* Per 100,000 hours worked
Legacy sites
Total Group (including
2022 acquisitions)
Legacy sites
Total Group (including
2022 acquisitions)
Health and Safety (H&S) comes first in everything we do. Across
Spirax Group we encourage all colleagues to play a vital role with a
collective responsibility to do the right thing, even when no one is
looking. We care about ourselves and our colleagues. Everyone in
our Group is empowered and supported to speak up if things are
not right. In support, we will listen, respond, learn and continually
improve as one team. Our Group H&S Policy commitment was
updated in 2023 and further refreshed at the start of 2024, our
commitments include:
• Group H&S performance will be discussed at all Group Executive
Committee (GEC) and Board meetings
• Appropriate resources is made available to support our H&S
journey
• Our Group Reporting & Safety Management Platform will be
adopted by all operating companies and Group functions
• Annual H&S objectives and targets, in line with the Group H&S
Excellence Framework and other strategic initiatives, will be
subject to a formal review, at least annually
Wherever we operate, we will comply with all relevant H&S
legislation. If our Group standards are higher than, and not in
conflict with, local standards we will operate to the higher set of
standards. All Serious Lost Time Accidents, will be reported to the
GEC by the responsible GEC member, once the initial facts are
known and within 48 hours. Our operating companies and Group
functions will implement and maintain specific and local H&S
organisation, responsibilities, governance and arrangements. These
will be sufficiently resourced, subject to continual improvement and
at least an annual review.
We continue to evolve our approach with the introduction of a
five-year Group H&S Excellence Framework. This is our internal
philosophy to achieve significant enhancements to our Culture;
Assurance; Risk; and Engagement (C.A.R.E.), in addition to
established external systems certification across the Group. At the
time of publishing, 50 of our Group Companies are certified to H&S
management standard ISO 45001 or equivalent. During this period,
we also supported the H&S alignment and integration of our two
recent acquisitions, Vulcanic and Durex Industries.
Focus for 2024
• Continue to implement our Group-wide H&S Excellence
Framework, through Bronze level rollout
• Complete a Group-wide H&S Culture survey
• Complete an independent review of our H&S strategy
62
Spirax Group Annual Report 2023
Progress
We successfully launched the foundation level of our H&S Excellence
Framework in January 2023. The purpose of this initial level was to
create a consistent but stretching baseline across the Group. We
are pleased that in 2023, 99.9% of our Group, excluding the recently
acquired Vulcanic and Durex Industries, achieved foundation level
by self-assessment, which was subject to validation sampling. In
Vulcanic and Durex Industries, 58% and 64% achieved this level
respectively and across Spirax Group, all Divisions met the targets
set. The foundation level will continue to be subject to further
ongoing validation in 2024, including on site.
Other highlights during the year included revitalising our
behavioural-based safety programme to create our own bespoke
pathway which includes an evolving suite of learning videos using
actors to recreate previous incidents to promote engagement and
learning. Other examples from the framework included: a full
machinery inventory, validation of use and risk assessment; a major
focus on pedestrian and vehicle interaction risk reduction; and a
range of risk control assurance requirements. Cross-Group learning
and sharing of best practice continued to be at the heart of our
approach throughout the year, with a wide range of engagement
initiatives being well-attended across all three Businesses. This
regular cadence and engagement has been invaluable as we have
matured and advanced our approach to team collaboration.
We have also continued our investment in technological solutions to
improve our understanding of risk and to build our culture. Examples
include the successful pilots of a machine-learning data analysis
tool and an H&S Culture benchmarking platform. To provide
additional context and clarity of relative risk in incident reporting,
we introduced a definition of Serious Lost Time Accidents (SLTA).
These include, but are not limited to: any accident that results in
admittance to hospital, or injuries leading to a permanent impairment.
There were no work-related fatalities among colleagues or contractors
and whilst our overall lost-time accidents have increased this year,
there is no discernible trend. This is considered indicative of our
good reporting culture, which is being fully embraced by our
acquisitions and is a good sign of our cultural alignment. Our
all-workplace incident rate, without our acquisitions, has reduced
by 11% in this reporting period. Having undertaken an analysis of
SLTA, this rate is low, currently 0.05 (excluding 2022 acquisitions).
Our acquisitions are embracing our H&S culture and we have an
active programme of H&S alignment and continual improvement.
• New Group H&S thematic assurance audits (including further
validation of our Foundation level of the framework)
• Implement our new machine-learning H&S data analysis tool
Strategic Report
People and wellbeing
We are a global business united by our Purpose and
where the safety and wellbeing of our colleagues are
paramount. Wherever we work, we are guided by our
Values of Safety, Collaboration, Customer Focus,
Excellence, Respect and Integrity. They are part of an
inclusive culture that empowers strong relationships
and supportive teams, where everyone can contribute
and learn from each other and where meaningful work
helps create the sustainable future we all aspire to
have. They are supported through our HR policies and
systems that help protect the rights of our colleagues
and ensure their equitable treatment around the world.
In 2023, we hosted the awards ceremony for our inaugural
Group-wide, Values-based recognition programme, the Spirit
Awards. From a pool of 633 applications, six Values winners were
announced alongside a Group Chief Executive Award and a
People’s Choice recipient which was the result of a global colleague
vote.
Nominations have been received for our second Spirit Awards and
18 finalists have been selected from just over 300 applications. The
finalists will be invited to attend the Awards Ceremony in 2024
when the winner in each Value category will be announced.
We strive to continually improve the development opportunities for
all colleagues. In September 2023, we launched our new learning
and development portal, SPARK. This gives our colleagues access
to learning academies on topics such as Personal Development,
Wellbeing and Mental Health, Inclusion and Diversity, Health and
Safety, Sustainability and more. It includes colleague communities
and a range of content that can be tailored to individual development
goals, helping our colleagues to ignite their potential. Together with
One Place, our new internal colleague platform that was launched
in March 2023, this is helping to empower the creation of more
inclusive workplaces where wellbeing and mental health are
prioritised building a sense of belonging across our Group.
We introduced a Wellbeing Day in 2022, giving colleagues all
around the world an additional day of paid annual leave to focus on
their wellbeing and self-care. Having seen the impact of providing
that extra time for colleagues to refresh and invest in their positive
mental health, the Wellbeing Day was brought back in 2023 and has
been made permanent for all colleagues from 2024 onwards.
Progress
In 2023 we conducted our biennial Colleague Engagement Survey.
Across the Group, 90% of our colleagues participated. Whilst our
engagement score remained static at 72%, we saw some significant
improvements across the Group in the following areas:
i. Valuing and promoting diversity. The launch of our Group
Inclusion Plan, Everyone is Included, in 2022 has had a
tangible impact on our inclusion metrics in the engagement
survey. Overall, the Inclusion Index increased by five percent
since 2021 (excluding Vulcanic and Durex Industries). This
was particularly strong in Steam Thermal Solutions (STS)
where there was an eight percent increase. More
significantly, our colleagues said that our Group values and
promotes diversity, with this score increasing nine percent
since 2021 to 78% positive.
ii. Actively helping our communities. This theme saw the
greatest improvement of all colleague engagement survey
results (up ten percent since 2021) whilst ‘Supporting
colleagues to be environmentally responsible’ also scored
highly at 83% favourable. This reflects the progress we have
made embedding our One Planet Sustainability Strategy
and our focus on fulfilling our Purpose, with one of our
recognised stakeholders being the communities in which we
work.
iii. Supporting a balance between work and personal life.
Colleague wellbeing saw improvement across the Group (up
four percent since 2021), with colleagues recognising the
focus we place on mental health, wider wellbeing and
supporting a balance between work life and personal life.
Our aim is to continually improve these scores. In 2023, we
supported this with a range of events throughout the year
covering topics such as psychological safety, the
menopause and preventing male suicide. We also produced
a World Mental Health Day resource pack and shared it
across the Group.
Focus for 2024
• Follow-up actions from the Colleague Engagement Survey
• Refresh and embed our Colleague Promises
• Continue to embed One Place and launch an app to improve
access for desk-free colleagues
• Further develop and embed Spark
• Ongoing focus on inclusion, wellbeing and mental health
Spirax Group Annual Report 2023
63
Strategic Report
Sustainability Report continued
A progressive, supportive
and inclusive culture
We want every day to be exceptional for
all our colleagues. That’s why we enable
them, through our Purpose,
Values, business model and Group
Inclusion Commitments, providing the
framework to help them achieve their
potential.
Spirax Group endeavours to offer a consistently exceptional
colleague experience. Colleagues have regular
opportunities to give feedback and offer suggestions for
improvement such as our biennial Colleague Engagement
Survey. From this feedback we have developed four
colleague promises that define what it means to work as
part of Spirax Group.
Our promises are designed to encapsulate our Purpose,
Values and Group Inclusion Commitments.
2.
Meaningful work creating
a sustainable future for
all
Within every role in Spirax
Group there is the opportunity
to be part of something bigger.
We promise colleagues
meaningful work that enables
them to use their unique
capabilities and innovate to
engineer a more efficient, safer
and sustainable world.
3.
Development every day to
fulfil your potential
With an eye to the future,
colleagues have the
opportunity to drive their
careers, problem solve and
develop new capabilities whilst
recognising and building on
their strengths. Our dedicated
learning platform, SPARK, as
well as our ‘Development
every day’ festivals are just
some of the ways in which we
bring this promise to life.
4.
Belonging to supportive
teams and strong
relationships
Our colleagues are part of
friendly, supportive and
innovative teams and connect
with dedicated, inspiring and
diverse global colleagues.
Colleagues are supported and
encouraged to be themselves
and champion an inclusive
culture.
1.
An inclusive culture
based on Values
As a leading global business,
we are committed to creating a
more inclusive and equitable
world for our colleagues at
work, at home and in the
community. Our shared Values
of Safety, Collaboration,
Customer Focus, Excellence,
Integrity and Respect are our
organisational ‘glue’; they guide
our behaviours and underpin
our sustainable approach to the
way we do business and work
together every day.
Inclusion is present in all our
Values and brought to life
through Everyone is Included,
our Group’s Inclusion Plan,
which has ten Group Inclusion
Commitments designed to
support colleagues through all
of life’s key moments.
Representing the views of our colleagues
• We have a comprehensive engagement programme to
make sure we hear from colleagues about what matters to
them, including focus groups and a biennial Colleague
Engagement Survey. Many of our colleagues consistently
highlight four strengths, which they value highly:
• A safety mindset ‘first and foremost’ – this is a particularly
strong observation from colleagues who have recently
joined our Group
• A strong Values-based culture – colleagues regularly
share examples of living our Values in the real world,
which deliver better customer service, grow the business
and improve colleague experience
64
Spirax Group Annual Report 2023
• A sense of belonging within supportive teams – most
colleagues we speak to feel part of a ‘local’ business,
where they have a sense of being involved, listened to
and permission to be entrepreneurial
• The introduction of inclusive policies, such as gender-
neutral policies for parental leave and carers’ leave, is
seen as being best-in-class
• Colleagues also appreciate being part of a resilient and
strong Company and felt supported through the cost-of-
living challenges of 2023
Strategic Report What our colleagues have to say
Connecting personally with Company Purpose
It’s good to talk and that happens much more naturally when you feel part of a strong
and supportive team.
That’s why, when 40 colleagues came together to celebrate the 50th anniversary of
the founding of Spirax Sarco (part of Steam Thermal Solutions) in Japan, the operating
company’s General Manager, Shinichi Oyama saw an opportunity.
“It was a celebration but the event was also the perfect platform through which to
strengthen trust and to create unity in the team. So we asked colleagues to share their
own personal purpose or ‘ikigai’.
“Across two days, working in small groups, we participated in several workshops
including ‘Leading with Purpose’, the ‘Story of Your Life’ and ‘Every day is Still Day
One’, and played games to break the ice and keep the conversations going.
“The feedback has been overwhelmingly positive. In developing their own personal
purpose, colleagues were able to better relate to our Company Purpose and through
personal storytelling have built much stronger relationships with each other.”
Building stronger teams through an inclusive approach
We are all unique, we all have a story and the diversity of our lived experiences and
perspectives is what makes us strong as a team. When Ilysia Carlberg joined
Chromalox, part of Electric Thermal Solutions, to take up an inclusion-focused role,
she set out to broaden the diversity of colleagues in the team and to help everyone
feel more included.
Recognising the challenge of personal bias in the recruitment process, Ilysia
introduced a linguistic gender bias decoder, an online tool to help hiring managers to
identify subtle bias in job descriptions and adverts. To support the more inclusive
process, she also created a set of standard interview questions and made sure to
include a debrief step.
“The blueprint for inclusivity and equity lies in a structured interview process, where
every candidate is afforded the same opportunity to shine. By fostering clear
guidelines and standardised criteria, we dismantle biases and pave the way for diverse
talents to thrive, ensuring that merit, not circumstance, defines success in our working
environment.” Ilysia Carlberg, Talent and Inclusion Programs Manager, Chromalox
Helping everyone feel included
The UK operations of our Watson-Marlow Fluid Technology Solutions Business, in
Falmouth, has been actively fostering positive change within the community,
demonstrating our commitment to LGBTQ+ (lesbian, gay, bi, trans, queer and
questioning) inclusion. The Business has developed a mutually advantageous
partnership with Cornwall Pride. As part of this, it gifts some of its allocated stand
spaces at community Pride events to local charities who might not have otherwise been
able to attend. This has helped charities such as ShelterBox and St Petrocs raise their
profile with 40,000 people who attend Cornwall Pride each year.
Watson-Marlow has signed the Cornwall Pride Pledge, reinforcing our Group’s position
as a safe place for all LGBTQ+ people, wherever we operate in the world. Through our
ongoing partnership in Cornwall we want to emphasise the strength of our support for
the LGBTQ+ community. Our ongoing programme includes co-envisioning the future of
Cornwall Pride for the next decade, colleague training and educational workshops.
“Our colleagues have really got behind the partnership. From volunteering to
supporting the events and participating in activities in the workplace, it’s been great to
see colleagues celebrating inclusion. A highlight of 2023 was when the team hosted
the UK’s largest Progress Pride flag at our Cornwall operations.” Rehan Afzal, Head of
HR, EMEA, Watson-Marlow Fluid Technology Solutions
Spirax Group Annual Report 2023
65
Strategic Report Sustainability Report continued
A progressive, supportive and
inclusive culture continued
What our colleagues have to say continued
Bringing us together as Spirax Group
For three years we’ve been evolving how we communicate with
and unify colleagues across the Group.
To deliver these improvements, our Communications teams
have been ‘developing every day’, navigating complex
challenges to put in place channels that reach all colleagues,
wherever they are and whatever they do. The resulting impact
of our digital signage network and a new colleague
engagement platform mean that colleagues feel more informed
and engaged.
The Spirit Awards are now in their second year and the impact
we have seen from giving colleagues a platform from which to
be recognised and celebrate the difference they make has
been tangible.
These initiatives help colleagues feel part of One Group and
know they are part of something bigger. To help cement this
thinking and make it more visible outside the Company, we
turned our attention to our external channels and to our brand.
In February 2024, we launched the new Spirax Group brand
alongside a new website. Spirax Group is the complete
representation of our Group’s growth and evolution and stands
for everyone and everything that we do.
Hazel Meldrum is the Group’s Head of Communications:
As a low-cost, internally led and timebound change
programme, this was perhaps the team’s biggest challenge
yet. We set out to take my idea on a post-it note and make it
reality in less than a year with the clock ticking ahead of the
announcement of the Group’s Full Year Results, our first as
Spirax Group.
“Our new brand is a significant milestone, but all of these
initiatives demonstrate how, over the last three years, we have
been able to develop our communications capability at the
centre, as well as in our Businesses. I’m proud that we’ve
provided our teams with growth, as well as a sense of
achievement and fulfilment. They can see the meaningful
difference they are making, by helping colleagues feel more
informed, connected and engaged, as well as through enabling
our wider stakeholders to better understand who we are, what
we do and what matters to us.”
Together as One Group. Together, as Spirax Group
66
Spirax Group Annual Report 2023
Strategic Report Sustainability Report: Responsible business foundations continued
Inclusion and diversity
Gender – Board of Directors*
Gender – senior leadership*
Gender – total workforce*
40%
40%
30%
32%
26%
26%
2022
60%
60%
2022
68%
70%
2022
74%
74%
2023
Female – 4 (2022: 4)
Male – 6 (2022: 6)
Non-binary and other
genders – none
* At 31st December 2023
2023
Female – 18 (2022: 19)
Male – 42 (2022: 40)
Non-binary and other
genders – none
2023
Female – 2,588 (2022: 2,692)
Male – 7,323 (2022: 7,724)
Non-binary and other
genders – data not available
Inclusion and equity create the conditions where all of our
colleagues are able to be their authentic selves and achieve
their potential. A culture that empowers and embeds this is
one that also attracts great talent from all backgrounds. It
brings a diversity of individuals, experiences and thought to
our Group, helping us become a better and higher
performing business. This fuels our continued growth,
creating more opportunities for our colleagues and other
stakeholders. Across Spirax Group, we see difference as our
strength and aspire for everyone to feel included.
Progress
The February 2024 FTSE Women Leaders Review report
ranked us as 61st in the FTSE 100 for gender diversity at
Board and senior leadership (Group Executive Committee
and direct reports combined) levels based on data from
October 2023 (February 2023 report: 39th). The Review,
co-Chaired by our Group CEO, Nimesh Patel, noted that we
continue to meet its target of 40% women on the Board.
Whilst gender diversity of senior leadership dropped slightly
on the previous year by year-end 2023 (30%), we anticipate
being at 33% by the end of Q1 2024. We remain committed
to achieving a minimum of 40% women in our senior
leadership by December 2025.
In addition, the Parker Review report, published in Q1 2023,
confirmed that we continue to meet its goal of having at
least one ethnically diverse Director on our Board.
Recognising the strategic significance of digital strategy,
Maria Wilson was appointed to our Group Executive
Committee (GEC) as Group Digital Director in 2023. In
December 2023, we announced the appointment of Louisa
Burdett as Chief Financial Officer (CFO) and Executive
Director, following Nimesh Patel’s move from CFO to Group
Chief Executive Officer in January 2024. Louisa will join the
Group in this role from July 2024. In February 2024, we also
announced the appointment of Céline Barroche as Group
General Counsel and Company Secretary to the Board, as
well as a member of the GEC, following the upcoming
retirement of Andy Robson.
In line with Listing Rule 9.8.6, data used to compile diversity
information is based on internal HR records for our
Executive management. For the Board of Directors, we seek
individual permission to share this data on an annual basis.
We do not prescribe set gender or ethnicity categories, but
ask for Directors to self-describe this.
In support of our gender equity journey, we continued our
Women’s Executive Mentoring Programme and our
partnerships with Women in Science and Engineering
(WISE) and the Women’s Engineering Society (WES).
Spirax Sarco and Gestra Italia – celebrating our
gender equity milestone
In Spirax Sarco and Gestra Italia, our teams are working
hard to create an inclusive and equitable workplace
where everyone feels respected and treated fairly and is
comfortable to be themselves. In recognition of this, we
have received the Italian UNI/PdR 125:2022 Gender
Equality Certification. This is given to organisations that
demonstrate commitment to promoting gender equality
and inclusivity within the workplace. The certificate
recognises that we have adopted specific practices and
cultural changes aimed at creating a more gender-equal
workplace.
Spirax Group Annual Report 2023
67
Strategic Report
Sustainability Report: Responsible business foundations continued
Inclusion and diversity continued
Progress continued
Our Women’s Global Network also continued to connect and
support women and allies across the Group. This included
marking International Women’s Day with a global webinar on
‘embracing equity’, menopause awareness training and
activity covering wide-ranging topics such as
‘Endometriosis and menstrual health’, ‘Psychological safety’
and ‘Allyship across genders’.
Following on from the successful launch of our Group
Inclusion Plan, Everyone is Included and Group Inclusion
Diversity goals
By the end of 2025, our ambition is to achieve:
• 20% women in commercial leadership roles
• 20% of Group Executive Committee (GEC) direct
reports from under-represented ethnic groups
• 30% women in our global workforce
• 40% women in senior leadership (including each of
our Board, GEC and GEC direct reports
communities).
We will also seek to:
• Increase the ethnic diversity of our Board and GEC
• Have a woman as our Chair, Senior Independent
Director, Chief Executive Officer or Chief Financial
Officer
And annually, we aim to achieve:
• 50% women joining the Global Graduate
Development Programme
• 30% of UK and US graduate intake from under-
represented ethnic groups
Commercial leadership roles
Direct reports to GEC
12.5%
17.6%
Commitments in 2022, we formally launched our Group
Diversity goals at our Global Leadership Conference in
March 2023. These goals widen our focus on gender and
introduce new aspirations to increase the ethnic diversity of
our colleagues, so that we better reflect the diversity of the
communities we are part of.
In support of the Parker Review, we also set a new goal of
25% of senior leadership (Group Executive Committee and
direct reports) to be from under-represented ethnic groups
by December 2027.
In 2023, we increased our focus on race equity, through
roundtables with our Black and African American colleagues
in the USA and related action planning with colleagues,
leaders and HR practitioners. In June and July, we hosted
two global race equity webinars to explore the context for
racism in different cultures, share colleague experiences
and help colleagues to consider how they can move from
being ‘non-racist’ to ‘actively anti-racist’ through simple,
practical actions. In addition, we continued to support the
Change the Race Ratio campaign, marked UK Black History
Month in October with a resource pack for colleagues and
launched a new Multicultural Global Network.
In 2023, we increased our support of LGBTQ+ Pride
activities, by attending and supporting four UK Pride events
and running three global Pride webinars. In Brazil, Steam
Thermal Solutions ran an LGBTQ+ awareness event, whilst
our US operations supported South Carolina Black Pride and
the Trevor Project, a leading suicide prevention and crisis
intervention charity for LGBTQ+ young people.
This year, we continued to embed inclusion, equity, diversity
and wellbeing into our wider business processes. For
example, we added a wide range of content in to our new
Group education platform, SPARK, through a new Inclusion
and Diversity Academy and a Wellbeing Academy. We also
embedded inclusion, wellbeing and mental health into our
new Group Health and Safety Excellence Framework (see
page 62) and our global supplier selection and monitoring
processes (see page 80).
2023 global
graduate intake
2023 UK and USA
graduate intake
33.3%
50%
50%
87.5%
82.4%
66.7%
Female – 18
Male – 126
Majority ethnic communities – 42
Under-represented ethnic
communities – 9
Female – 8
Male – 8
Majority ethnic communities – 6
Under-represented ethnic
communities – 3
Focus for 2024
• Embed Diversity goals across the Group
• Achieve a broader and deeper focus on race equity
68
Spirax Group Annual Report 2023
• Further grow and empower our global colleague networks
Strategic Report Ethical business
Our strong Company Values and robust Group policies instil a
culture of ethical behaviour and provide a framework within which
we operate. We expect that colleagues in all parts of our global
operations meet these high standards.
Progress
All colleagues with a Company email address are required to
complete our Group Essentials training programme when joining the
Company and annually thereafter. In 2023 we migrated all our
Group Essentials training modules to a new software environment,
to facilitate easier and quicker maintenance going forward. We also
gave each course a design refresh to ensure that they remain
current and engaging for our colleagues.
Our Group Essentials training covers topics including Anti-Bribery
and Corruption (ABC), Corporate Criminal Offences (CCO), Health
and Safety (H&S) and Sustainability. After a pilot, including a review
cycle, the Group Essentials content for our desk-free colleagues will
be rolled out to our Group manufacturing sites in 2024.
Following the release of our new Group Sustainability Policy and
new Environmental and Energy Policy, we created training for senior
leaders to introduce these and increase knowledge of all Group
sustainability-related policies. This training highlights key points
and principles colleagues should be aware of in each policy and
enables leaders to support their teams’ understanding. We also
released an animation internally to all colleagues to raise awareness
of the new Sustainability Policy. By the end of the year, 221 senior
leaders had completed this voluntary training.
In 2023, we continued the work to embed the Group Essentials
training to our newer colleagues in Cotopaxi, Vulcanic and Durex
Industries, as well as to our factory-based colleagues. By the end
of the year 6,938 colleagues across the Group had completed ABC
training and 6,782 had completed CCO training. Introduction to
Sustainability had been completed by 6,575 colleagues and Health
and Safety at Work by 7,205 colleagues.
Whistle-blowing
Any colleague with a concern about potentially unethical behaviour
can raise it confidentially through a local, independent third-party
whistle-blowing service, hosted by Safecall. In 2023, 51 reports
were raised globally via this service.
All reports were investigated by senior management and action
taken if necessary, with summaries of reports and related actions
reviewed by the Audit Committee.
Governance
The One Planet Sustainability Strategy has central oversight and
is sponsored by the Group Executive Committee (GEC). The Group
Chief Executive Officer is the overall Executive sponsor for the
strategy. The day-to-day oversight is undertaken by the Group
Sustainability Management Committee (GSMC), with membership
detailed in our sustainability organisation chart. The GSMC meets
regularly to discuss strategic progress.
This feeds into updates at most GEC meetings as well as at
quarterly updates to the One Planet Steering Committee
(comprised of the GEC). The Board also receives regular updates
throughout the year. This combination of Board and Executive
oversight ensures that the One Planet Sustainability Strategy is a
key focus area for the Group.
Responsibility for implementing the strategy sits at a Business level,
with the strategy embedded into the core Business strategies of
Steam Thermal Solutions, Electric Thermal Solutions and Watson-
Marlow. Each Business and operating company is responsible for
implementing the One Planet Sustainability Strategy through its
own Business strategy; ensuring that all colleagues have the
opportunity to get involved; meeting and, where possible,
exceeding minimum expectations; delivering timely and accurate
data; and collaborating to share learning across the Group.
Sustainability organisation chart
Group Chief
Executive
Officer
Board of Directors
Group Executive Committee
Group Director of Sustainability
One Planet Steering Committee
During 2023, Committee members included: Group Chief
Executive Officer; Group Chief Financial Officer; Group
Director of Sustainability; and One Planet Strategic Initiative
and Strategic Project Executive Sponsors.
Group Sustainability Management Committee
During 2023, Committee members included: Group Director of
Sustainability; Business Heads of Sustainability; One Planet
Strategic Initiative and Strategic Project Leads; Group
Sustainability Reporting Manager; Group Head of Diversity,
Equity and Wellbeing; and Investor Relations Executive.
Business Heads of
Sustainability
Divisional Directors,
Regional and General
Managers
Sustainability Strategy project leaders and teams
Colleagues and organised colleague groups
Focus for 2024
• Complete deployment of Group Essentials training to desk-free colleagues
Spirax Group Annual Report 2023
69
Strategic Report Sustainability Report continued
One Planet at a glance
We have been making strong progress against our key strategic targets as part
of our One Planet Sustainability Strategy.
All data here excludes 2022 acquisitions, Vulcanic and Durex Industries, to
accurately reflect the progress achieved on a like-for-like basis since the
strategy was launched in 2021.
Group GHG emissions
(scope 1 and 2)
tonnes CO2e (market-based)
(excluding acquisitions)
Group energy consumption
MWh (excluding
acquisitions)
Operating companies that
have delivered a biodiversity
initiative cumulative %
(excluding acquisitions)
Total water use
m3 (excluding acquisitions)
25,310 tonnes
144,885 MWh
83%
163,778 m3
2023*
25,310
2022*
26,938
2021*
2020*
2019*
2023*
2022*
2021*
2020*
38,981
40,255
46,206
2019*
144,885
157,424
2023
2022
83
52
164,390
2021
12
150,726
169,412
2023
2022
2021
2020
2019
163,778
203,796
168,742
163,280
182,746
* Historic data restated in line with
* Historic data restated in line with
our methodology statement
our methodology statement
Description
Energy consumed directly at all
sites across the Group,
including fuel combustion,
company vehicles and
electricity use.
Description
Percentage of operating
companies that have completed
a biodiversity initiative since
the strategy launch in 2021
(cumulative).
Description
Water consumed at our sites
across the Group.
Description
Scope 1 greenhouse gas (GHG)
emissions arise directly from
company-owned or -controlled
sources, such as company
vehicles or fuel combustion.
Scope 2 GHG emissions are
indirect emissions, primarily
from the generation of purchased
electricity. Market-based
emissions take into account
contractual and supplier-
specific GHG emissions factors.
Link to strategic initiatives
Link to strategic initiatives
Link to strategic initiatives
Link to strategic initiatives
Strategic initiatives:
Net zero carbon
Biodiversity net gain
Environment improvements
Sustainable products
Sustainable supply chain
Supporting our communities
Read more about how we delivered on our strategic initiatives in 2023 on pages 72 to 81
70
Spirax Group Annual Report 2023
Strategic Report Total waste generation
tonnes (excluding
acquisitions)
Waste to landfill
% (excluding acquisitions)
Operating company cash/
in-kind donations £’000
(excluding acquisitions)
Volunteering
(hours) (excluding
acquisitions)
6,116 tonnes
10.1%
£335.5
24,973* hours
2023
2022
2021
2020
2019
6,116
2023
10.1%
6,888
2022
10.2%
6,327
5,974
2021
2020
13.0%
15.9%
2023
2022
2021
2020
335.5
2023
349.6
2022
24,973
22,140
335.6
2021
11,057
197.7
2020
3,154
6,572
2019
18.7%
2019
188.5
2019
5,311
Description
Waste generated and disposed
of at our sites across the Group.
Description
Proportion of waste that is sent
to landfill versus waste that was
reused, recycled or used to
generate electricity.
Description
Cash and in-kind donations
made to charitable causes from
our Group operating companies.
* 58,170 cumulative 2021 – 2023
Description
Hours spent volunteering by our
colleagues across the Group.
Link to strategic initiatives
Link to strategic initiatives
Link to strategic initiatives
Link to strategic initiatives
Spirax Group Annual Report 2023
71
Strategic Report Sustainability Report: Strategic initiatives
Net zero GHG emissions
Key strategic targets
• Net zero scope 1 and 2 emissions by 2030, with an interim
target of a 50% reduction (compared to 2019) by 2025
• 20% reduction in Group energy use from plant, equipment
and building assets (compared to 2019) by 2025
Approved SBTi targets
• Reduce absolute scope 1, 2 and 3 greenhouse gas (GHG)
emissions by 50.4% by 2032 compared to 2021 baseline
• Net zero GHG emissions across the value chain by 2050
Our progress in 2023*
6%
Decrease in scope 1 and 2 emissions (market-based)
since 2022
52%
Electricity from renewable sources in 2023
8%
Reduction in Group energy use since 2022
* Includes recent acquisitions
Energy saving initiative
At our Steam Thermal Solutions
site in Blythewood (USA) we use
steam to test equipment and
carry out heating processes. By
using our metering service to
analyse energy consumption
against the operating schedules
of each process, we were able to
identify inefficiencies. We
reduced boiler pressure and
closed valves that feed the
equipment when not in use, We
expect these improvements to
reduce natural gas usage by
44% and save 322 tonnes CO2e
per year.
In 2023 we continued to make good progress against our carbon reduction
commitments and succeeded in having our ambitious net zero targets validated by
the Science Based Targets initiative (SBTi).
As set out on page 61, the SBTi drives ambitious climate
action in the private sector by enabling organisations to set
emissions reduction targets in line with the latest climate
science. It’s based on a partnership between the United
Nations Global Compact (UNGC), the World Resources
Institute (WRI), the Carbon Disclosure Project (CDP) and the
Worldwide Fund for Nature (WWF). The verification and
approval received from the SBTi for our targets provides a
clearly defined pathway for Spirax Group to reduce
greenhouse gas (GHG) emissions.
Alignment with UN SDGs
Progress
We have continued to increase the proportion of green electricity
in our operations, with additional solar arrays now operational on
our sites in Nuevo Laredo (Mexico), Barcelona (Spain) and Devens
(USA). Additional green energy contracts mean that 61% (2022:
57%) of electricity at our legacy sites now comes from renewable
sources, 52% including recent acquisitions. As part of our
responsible green energy sourcing strategy, we are putting power
purchase agreements (PPAs) in place in several of our sites,
including at our Steam Thermal Solutions (STS) site in Monterrey
(Mexico), where we have invested in a solar array. This agreement
secures renewable electricity for our needs for the medium term at
this site, while also ensuring we are investing in infrastructure
required to increase renewable capacity in this area.
Electric Vehicles (EV) are now expected as standard for all new
company vehicles, unless electric charging infrastructure is
insufficient. Exemptions to this EV first policy are monitored and
investigated on a case-by-case basis. At the end of February 2024,
7% of our vehicle fleet had transitioned to electric vehicles. We are
assessing countries where infrastructure limitations can affect the
take-up of this transition and prioritising those where the
infrastructure better supports the transition.
72
Spirax Group Annual Report 2023
Strategic Report
The installation of digital metering and monitoring at 20 of our
manufacturing sites has meant that we have started to monitor
energy use across our sites in real time. We can use this data to
identify areas of improvement to reduce our energy consumption
and GHG emissions. At our Steam Thermal Solutions (Spirax Sarco)
manufacturing site at Runnings Road (UK) we were able to improve
our energy management to reduce boiler losses there, contributing
to a reduction in energy consumption at this site by over 20% in
2023 compared to 2022.
Greenhouse gas (GHG) emissions performance
In 2022 we acquired Vulcanic and Durex Industries. Following the
completion of their first full year as part of Spirax Group, we are now
including their data and are restating our emissions and energy
consumption back to our 2019 baseline, in line with the GHG Protocol.
These Divisions of ETS will be aligning with our One Planet Sustainability
Strategy and our net zero commitments, but the focus to 2025 will
primarily be our legacy operating companies, while these new Divisions
further integrate into the Group and work to meet our standards.
The Group GHG footprint was verified in accordance with DIN EN
ISO 14064-3:2020 regarding its correctness and completeness.
This verification did not include 2022 acquisitions, as this was the
first year of those Divisions collecting data and integrating into
Group standards. For our legacy operating companies,
verification was received as follows:
“Acting as an independent Certification Body TÜV NORD CERT
GmbH has verified the carbon footprint, scope 1 and scope 2
(market-based), of the organisation for the reporting period
01.01.2023–31.12.2023 (inclusive) to be 25,310 tonnes CO2e.”
TÜV NORD CERT GmbH, February 2024
In 2023, on a market basis, excluding 2022 acquisitions, absolute
Group CO2e emissions fell six percent to 25,310 tonnes, compared
to 2022 and were 45% lower than 2019. At 15.0 tonnes per million
pounds of reported revenue, on an intensity basis, our Group
emissions fell by ten percent compared with the prior year and were
59.6% lower than 2019.
Some of the reasons for these reductions include the effect of 2022
site consolidations in Electric Thermal Solutions and Watson-
Marlow, in France and the UK respectively, the impact of efficiency
improvements at Spirax Sarco’s site at Runnings Road (UK) due to
Project ClearSky, the impact of renewable electricity sourcing and
emission reduction initiatives across the Group.
On a market basis excluding 2022 acquisitions, the UK accounted
for 14% of our GHG emissions in 2023, with 4,382 tonnes being
generated in total and an intensity of 38.3 tonnes per million
pounds of reported revenue. These emissions are comprised of
4,333 tonnes of scope 1 and 37 tonnes of scope 2 calculated using
market-based emission factors. Our emissions in the UK decreased
by 23% compared to 2023, largely due to energy efficiency
improvements due to Project ClearSky and the resulting change
from natural gas to renewable electricity at this site (see page 93).
For progress against our One Planet: Engineering with Purpose
Sustainability Strategy targets, see pages 72-81.
2050 net zero roadmap
Net zero Baseline 2021
One Planet interim target
Scope 1&2 (-50%)
e
2
O
C
s
e
n
n
o
t
c
i
r
t
e
m
n
o
i
l
l
i
M
15
10
5
Net zero near term target
Scope 1,2&3 (-50.4%)*
One Planet strategy target
Scope 1&2 (-100%)
Net zero long term target
Scope 1,2&3 (-90%)
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2035
2040
2045
2050
* Agreed SBTi target provides an allowance to reduce this to 33.3% in the near-term, with a requirement to catch up in the long-term
commitment, given the reliance on grid greening, which may be weighted in the longer-term
Activities in direct operations
• Substitute fossil fuels in i) steam generation using TargetZero
Activities across our value chain
• Continue to track the progress of grid-greening in reducing
products, ii) switch high temperature industrial processes for low
carbon alternatives, iii) progressively replace fossil-fuel
consuming building assets to low carbon alternatives and
climate-friendly refrigerants
• Source energy using onsite renewables, PPAs and green tariffs
aligned with the GHG Protocol (80% of electricity by 2025 and
100% by 2030)
• Transition vehicle fleet and travel practices to low carbon alternatives
emissions from our products ‘in-use’ phase. 96% of our scope 3
emissions are derived from electricity consumption by our
products in-use
• Optimise third-party logistics and transfer the shipping of
products to low carbon suppliers, implement a long-term low
emission logistics network across all modes of transport
• Work with suppliers to decarbonise critical scope 3 supply
chains, or seek alternative innovative low carbon products
• Improve energy management and monitoring practices across all
energy intensive facilities, supported by an internal absolute
energy reduction target
• Using life cycle analysis, address carbon intensive hot spots in
our products and minimise life cycle emissions. Develop
additional products supporting our customers’ net zero journey
• Engage with partners in a long-term carbon credit investment plan
across scope 1, 2 and 3, making provision by 2030 for our One
Planet Sustainability Strategy using credits for any remaining
emissions (maximum of 10% baseline scope 1 and 2 emissions)
Spirax Group Annual Report 2023
73
Strategic Report
Sustainability Report: Strategic initiatives continued
Net zero GHG emissions continued
Greenhouse gas (GHG) emissions performance continued
Group GHG emissions (scope 1 and 2)
tonnes CO2e (market-based) (including acquisitions)
Group GHG emissions (scope 1 and 2)
tonnes CO2e (location-based) (including acquisitions)
31,659 tonnes
40,510 tonnes
2023
2022
2021
2020
2019
18,537
13,121
31,659
20,899
12,816
33,715
24,339
22,406
46,745
22,295
24,264
46,559
26,029
26,644
52,672
2023
2022
2021
2020
2019
18,537
21,973
40,510
20,899
21,437
42,337
24,339
22,176
46,515
22,295
20,952
43,247
26,029
23,253
49,282
Scope 1
Scope 2
Scope 1
Scope 2
Group GHG intensity
tonnes CO2e per £m reported
revenue (market-based)
(including acquisitions)
UK GHG intensity
tonnes CO2e per £m reported
revenue (market-based)
(including acquisitions)
UK GHG emissions
(scope 1 and 2)
tonnes CO2e (market based)
(including acquisitions)
17.3 tonnes/£m
38.3 tonnes/£m
4,382 tonnes
2023
17.3
2023
38.3
2022
2021
2020
2019
19.0
2022
47.6
30.6
34.7
37.7
2021
2020
2019
103.0
117.3
111.6
2023
2022
2021
2020
2019
4,337
46
4,382
5,712
24
5,736
7,860
2,947
10,807
7,442
3,908
11,350
7,973
3,923
11,896
Scope 1
Scope 2
Group GHG emissions
(partial scope 3)
tonnes CO2e (well-to-tank and
transition and distribution)
(excluding acquisitions)
9,924 tonnes
2023
2022
9,924
9,933
Group GHG emissions
(full scope 3)
tonnes CO2e
(excluding acquisitions)
2022
2021
12,864,926
13,279,392
Greenhouse gas (GHG) emissions
performance continued
In line with the GHG Protocol, we are restating
historic greenhouse gas and energy data in order
to include data consistent with the change in
company structure. As accurate data is not
available for historic years for Vulcanic and Durex
Industries, 2023 data have been extrapolated for
historic years in line with their annual revenues.
For more information, see our methodology
statement on page 75 and at spiraxgroup.com/
sustainability-downloads.
Including Vulcanic and Durex Industries, our GHG
scope 1 and 2, market-based emissions were
31,659 (2022: 33,715) and have reduced 40%
since 2019.
Scope 3 emissions
As part of our ongoing work to assess and
improve the accuracy of our scope 3 emissions,
we worked in 2023 to quantify our 2022
emissions across our value chain. Working with
our external partners we have improved accuracy
of our assumptions and estimations, for example
changing to weight data for some purchased
goods and services, rather than relying purely on
assumptions based on spend. During this
process, we discovered that an error had been
made in the original baseline calculations.
Correction of this error means that we are now
restating our 2021 scope 3 emissions to be 13.3m
tonnes and are also disclosing 2022 to be 12.9m
tonnes. In 2024 we will recalculate our scope 3
emissions to include 2022 acquisitions, Vulcanic
and Durex Industries and submit our new baseline
to the SBTi for approval. We are looking at ways
we can influence reduction in our scope 3
emissions, including logistics in our value chain
and purchased goods and services, but scope 3
emission reductions will largely be dependent on
grid-greening.
Emission reduction initiatives
We completed a wide range of emission reduction
initiatives across the Group in 2023. For example,
our Chromalox manufacturing site in Ogden, Utah
(USA), recently completed a multi-year effort to
upgrade and optimise its air compressor system,
reducing energy consumption and emissions,
while ensuring less downtime and maintenance
and increased production throughput and quality.
This has led to a 55% improvement in operating
efficiency and a saving of approximately three
percent of GHG emissions annually at this site as
well as future-proofing for factory growth.
74
Spirax Group Annual Report 2023
Strategic Report Group energy consumption
MWh
(including acquisitions)
UK energy consumption
MWh
(including acquisitions)
Group energy intensity
MWh per £m of reported revenue
(including acquisitions)
UK energy intensity
MWh per £m of reported revenue
(including acquisitions)
166,356 MWh 41,891 MWh
90.7 MWh/£m
366.0 MWh/£m
2023
2022
2021
2020
2019
166,356
180,345
190,650
172,049
191,282
2023
2022
2021
2020
2019
41,891
51,673
55,200
48,807
50,663
2023
2022
2021
2020
2019
90.7
101.8
124.7
128.1
137.0
2023
2022
2021
2020
2019
366.0
428.6
526.3
504.3
475.2
Methodology statement
We employ an ‘operational control’ definition to outline
our carbon footprint boundary. Included within that
boundary are manufacturing facilities, administrative
and sales offices where we have authority to
implement our operating policies. For all entities we
have measured and reported on our relevant scope 1,
scope 2 and partial scope 3 emissions for 2023.
We have used the GHG Protocol Corporate Accounting
and Reporting Standard and emission factors from the
UK Government’s GHG Conversion Factors for
Company Reporting (2019, 2020, 2021, 2022 and
2023), data from the International Energy Agency
(2019, 2020, 2021, 2022 and 2023), ISO 140064-1 and
regionally specific Environmental Reporting Guidelines
to calculate our total CO2e emissions figures on a
location-basis.
To report under the market-based method we have
used the GHG Protocol data hierarchy, striving for the
highest precision possible. For sites with green energy
contracts, we have obtained emissions factors for the
relevant tariff and/or supplier in the first instance,
using the residual mix where supplier-specific
emissions factors (SSEFs) are not available. For sites
without green energy contracts, we follow the data
hierarchy and apply location-based factors only where
SSEFs or residual mix are not available. When entering
new green contracts, we apply SSEFs (where available)
from the start of the year and do not restate prior years
with SSEFs. No certified green energy contracts are
included in our market-based figures for 2019 or 2020.
For more information please see our methodology statement
on our website: spiraxgroup.com/sustainability-downloads
Energy performance
In 2023, total Group energy use excluding 2022 acquisitions
decreased by eight percent against 2022 to 166,356MWh and
decreased by 11% on an intensity basis to 90.7MWh per million
pounds of revenue (2023: 101.8).
Energy use in the UK accounted for 25% of the Group’s total usage
in 2023, at 41,849MWh and decreased by 19% compared with 2022.
On an intensity basis, UK energy use decreased 15% year-on-year,
to 365.6MWh per million pounds of reported revenue. Energy
intensity for the UK is high compared to that of the Group as a
whole, as we manufacture in the UK for sales overseas into global
markets.
Including Vulcanic and Durex Industries, total Group energy use
reduced 8% in 2023 to 166,356MWh (2022: 180,345) and has
reduced 13% since 2019. In the UK, energy use including
acquisitions was 41,891MWh.
Energy management
An example of an energy management project undertaken in 2023
is at our Watson-Marlow manufacturing site in Falmouth (UK). From
assessing our energy consumption using data from our digital
monitoring system, we were able to identify that air compressors at
this site were losing compressed air at the weekends, despite none
of the systems running at the weekend requiring compressed air.
This knowledge allowed us to identify leaks in the system that we
were able to fix and fit timers to automatically shut down these
compressors between Friday PM and Monday AM when they are
not needed. These changes are saving approximately 49,700kWh
per annum of electricity at this site.
Focus for 2024
• Implement a power purchase agreement for a material
proportion of our UK electricity consumption
• Progress electrification of our Spirax Sarco site at Runnings
Road (UK)
• Embed access to data via our digital monitoring system and
install digital meters at 2022 acquisition sites
• Further deploy energy management standards
• Resubmit targets to the SBTi to include recent acquisitions
Spirax Group Annual Report 2023
75
Strategic Report Sustainability Report: Strategic initiatives continued
Biodiversity net gain
Key strategic targets
• Deliver a biodiversity offset equivalent to five times our
global operational footprint by 2025
• Deliver biodiversity net gain* of +10% for all new
manufacturing sites and facilities
• Deliver at least one biodiversity initiative per operating
company, on site or in the local community by 2025
Our progress since 2021 (cumulative)*
1,656 acres
Land protected in Argentina
76%
Operating companies have delivered at least one
biodiversity initiative since the launch of the One Planet
Sustainability Strategy in 2021
* Quantification of net gain will be focused on large development
projects, where locally specific net gain methodologies will be
applied, similar in approach to the UK’s DEFRA methodology
* Includes recent acquisitions
Biodiversity initiative
In cooperation with LandCare and
Creating Canopies, five colleagues
from Spirax Sarco Australia
attended our third planting day at
Carnarvon Golf Course. On this day
they were able to plant 200 native
trees to grow the golf course
canopy and also maintain plants
that were planted the previous year.
Volunteering work at this site has
contributed to the return of bird life
to this space, with Birding Australia
recording 34 wild bird species at
this site, including Pacific Black
Ducks and a pair of Tawny
Frogmouths.
Biodiversity is our ally in the battle to counter the effects of climate
change. Healthy ecosystems can help to limit global temperature rises.
Whilst we are becoming more and more aware of the impact of climate
change on our environment and its inhabitants, we are also conscious of
the effects our business activities have and the complex network of
interactions between plants, animals and micro-organisms. Protecting
this delicate balance is an important objective for our One Planet
Sustainability Strategy and one that helps us to engage our colleagues,
our communities and our value chain.
Alignment with UN SDGs
Progress
We have continued to invest in our partnership with the World Land
Trust, funding the protection of a further 572 acres of land on the
Somuncurá Plateau in Argentinian Patagonia, equivalent to our operating
footprint, including that of our recent acquisitions, Cotopaxi, Vulcanic
and Durex Industries. Now in its third year, this long-term partnership is
helping to protect this unique environment and the species that thrive
there.
Headquarters in Cheltenham (UK), we have had our planting scheme
approved by the local authority and will implement this in 2024 to deliver
a biodiversity net gain of more than 10%. External assessment of
proposed plans at our Watson-Marlow site in Devens (USA), will also
deliver over 10% net gain in biodiversity and will start in spring 2024.
Further schemes are being developed at our Gestra site in Bremen
(Germany) and at Chromalox in Ogden, Utah (USA).
We are delivering excellent progress against our target for all Group
operating companies to complete at least one biodiversity initiative on
site or in the local community by 2025, with 83% of legacy operating
companies (76% including acquisitions) already having delivered a
biodiversity initiative to date. An example of an initiative delivered in
2023 is our Gestra manufacturing site contributing to reforestation of an
area in North Rhine (Germany), where a 12 hectare area has been
affected by damage due to a bark beetle infestation. Another example is
in India where Watson-Marlow colleagues planted 1,000 trees of eight
different species at Tulapur village in Pune.
Focus for 2024
• Progress biodiversity net gain for all major
construction projects
• Increase biodiversity initiatives in 2022 acquisitions
As part of our commitment to biodiversity net gain, we are developing
landscaping planting schemes to improve the biodiversity as part of all
major construction projects. At our newly rebuilt Spirax Group
• Continue to make progress against our target for all legacy
operating companies to complete a biodiversity initiative
by 2025
76
Spirax Group Annual Report 2023
Strategic Report Environmental improvements
Key strategic targets
• Reduce water consumption by 15% (compared to 2019)
• Achieve zero waste to landfill
• Reduce waste generated by our sites by 10% (compared
to 2019)
• Eliminate the use of solvent-based paint on our sites by
the end of 2025*
• All manufacturing sites certified to ISO 14001 standard or
equivalent by the end of 2025
* Unless mandated by customer requirements and with Group
Executive Committee approval
Our progress in 2023*
13%
Reduction in water consumption since 2022
2%
Decrease in waste production since 2022
14%
Waste to landfill in 2023
* Includes recent acquisitions
Waste reduction initiative
Wooden pallets and boxes from
incoming shipments which are in
good condition are reused wherever
possible at our Spirax Sarco site in
Wuhan, China. However, we
identified that, as a proportion of
total waste, wood had increased
sharply from 10% in 2019 to 30% in
2022, due to increased production
output. In an effort to reduce wood
waste at this site, we began
reconditioning used pallets instead
of recycling them. Slightly damaged
pallets are now repaired and severely
damaged pallets are dismantled to
be used as materials for the repairs
of others. Since starting this project
in March 2023, wood waste fell by
37% in the first half of 2023
compared with 2022, indirectly
saving approximately 1,170kg of CO2e
per year.
Progress
Following on from the rollout of waste and water action plan templates
in 2022 and the resulting reduction plans, we have begun to see the
positive impact of the work we have completed since launching our
One Planet Sustainability Strategy in 2021. This has been aided by
the implementation of monitoring and metering at all but one of our
Group legacy manufacturing sites in 2023, excluding 2022 acquisitions.
During 2023 we focused on our top five consumers of water and
producers of waste internally in each Business, ensuring that we
are improving practices and efficiency at these sites to have the
largest impact on our Group as a whole. We will utilise our learning
from these locations to disseminate across the rest of the Group as
part of internal best-practice sharing.
Of our 26 legacy manufacturing sites, excluding the recent acquisitions
of Cotopaxi, Vulcanic and Durex Industries, 22 are currently certified to
ISO 14001. In 2023, our Hiter manufacturing site in Brazil gained ISO
14001 certification and we have plans in place for 2024 and 2025 for
the remaining outstanding locations. None of the 11 new manufacturing
sites acquired at the end of 2022 currently have ISO 14001. Achieving
certification at these sites will be a priority in 2024 onwards, but is not
expected to be completed by 2025.
Spirax Group Annual Report 2023
77
The way we manage resources in our own operations is one of the
most direct ways through which we can lessen our impact on the
environment. By ensuring that we are operating efficiently we can
preserve resources, reduce our carbon footprint and minimise
pollution of the natural world.
Our focus on water efficiency, waste reduction and elimination of
solvent-based paints ensures that we are controlling how we use
resources and dispose of waste responsibly to protect the
environments where we live and work.
Alignment with UN SDGs
Strategic Report
Sustainability Report: Strategic initiatives continued
Environmental improvements continued
Total water use
m3
(including acquisitions)
Water intensity
m3 of water per £m of
reported revenue
(including acquisitions)
Total waste
generation
m3
(including acquisitions)
177,469 m3
96.8 m3/£m
6,781 m3
Waste intensity
m3 of waste per £m of
reported revenue
(including acquisitions)
3.7 m3/£m
Waste to landfill
%
(including acquisitions)
14%
2023
163,788
2023
96.8
2023
6,116
2023
3.7
2023
10%
14%
2022
2021
2020
2019
13,681*
203,796
168,742
163,280
182,746
2022
2021
2020
2019
* 2022 acquisitions,
Cotopaxi, Vulcanic
and Durex Industries
included from 2023
126.5
125.5
136.8
147.1
2022
2021
2020
2019
665*
6,888
6,327
5,974
6,572
2022
2021
2020
2019
* 2022 acquisitions,
Cotopaxi, Vulcanic
and Durex Industries
included from 2023
4.3
4.7
5.0
5.3
2022
2021
2020
2019
10%
13%
16%
19%
* Total Group (including
2022 acquisitions,
Vulcanic and Durex
Industries, from 2023)
Water
The Group water usage was verified by TÜV NORD CERT GmbH in
accordance with International Standard on Assurance Engagements
3000 Assurance Engagements Other than Audits or Review of
Historical Financial Information (ISAE 3000), regarding its
correctness and completeness. This audit did not include 2022
acquisitions, as this was their first year of collecting data and
integrating into Group standards, but a thorough internal review
was completed on their data. For our legacy operating companies,
assurance was received as follows:
Acting as an independent Certification Body TÜV NORD CERT
GmbH has verified the water usage of the organisation, for the
reporting period 01.01.2023–31.12.2023 (inclusive), to be
163,777,712 litres.
TÜV NORD CERT GmbH, February 2024.
In 2023, excluding 2022 acquisitions, our water consumption
decreased by 20% compared to 2022 to 163,778m3. This has been
due to the cumulative effects of the work we have been doing since
2021 to improve efficiencies in our processes and on sites. The
installation of monitoring and metering has meant that we have
been able to find and fix leaks that would otherwise have gone
undetected, for example at our Watson-Marlow site in Falmouth,
UK. It is estimated that fixing a previously unknown leak accounted
for a 37% reduction in this site’s water use compared to 2022.
Against our 2019 baseline, absolute water use excluding
acquisitions decreased by ten percent. On an intensity basis,
water use decreased by 23% compared with 2022, with an overall
reduction in intensity of 34% compared to our 2019 baseline.
For progress against our One Planet: Engineering with Purpose
Sustainability Strategy targets, see pages 70-71.
Including Vulcanic and Durex Industries for the first time in 2023,
water use in 2023 was 177,469m3 (2022: 203,796m3) and has
reduced 13% since 2022 and 3% since 2019.
Waste
Excluding Vulcanic and Durex Industries, our global operations
generated 6,116 tonnes of waste in 2023, which is a decrease of 11%
from the previous year. On an intensity basis, we saw a 15% decrease
in waste generated at 3.6 tonnes per million pounds of reported revenue.
As part of our data quality and continual improvement processes,
we have made adjustments to reported waste since 2019, ensuring
that we are capturing all waste streams at all sites possible. This
means we are restating our historic waste data, in line with our
restatement threshold of two percent, but are not rebaselining to
include proportional waste for 2022 acquisition companies.
The proportion of waste that is diverted from landfill globally in our
legacy sites has remained static, with 90% of our waste recovered,
recycled or used to generate electricity in 2023 (2022: 90%). Including
acquisitions, 86% of waste was diverted from landfill in 2023.
Including Vulcanic and Durex Industries for the first time in 2023,
waste production in 2023 was 6,781 tonnes (2022: 6,888 tonnes)
and has increased 3% since 2019.
Solvent-based paint
Our internal cross-Business working group continues to evolve and
has recently developed transition roadmaps for each Business that
details our working plans to transition away from solvent-based
paints. This group has also started to develop an internal standard
which defines the allowable percentage of volatile organic
compounds (VOCs) we use in our paints.
The roadmaps are periodically reviewed by senior leadership to
ensure full alignment and proper planning. Each of the Businesses
has partnered with its primary paint suppliers for additional
technical support in this journey and to ensure we are updated on
the most current technology.
An exercise has been started to understand which of our recently
acquired sites are using solvent-based paints and the associated
volumes. Roadmaps will be developed to drive the elimination of
these paints and a successful transition to aqueous-based paints,
although this is not expected to be started before 2025 for these
new businesses.
Focus for 2024
• Implement planned water improvement projects
• Install digital monitoring and metering at the largest of our
recently acquired sites, as well as sub-metering and finding
improvements from this data
• Complete end-to-end sustainability reviews of Vulcanic sites
• Strengthen internal community of practice, empowering,
educating and developing leaders within the sustainability space
78
Spirax Group Annual Report 2023
Strategic Report Sustainable products
Key strategic targets
• Quantify the sustainability benefits and whole life cycle
carbon footprint of some existing product groups and all
new products
• Grow sales of products with quantifiable sustainability
benefits to customers
• Eliminate all single-use plastic (SUP) and non-recyclable
packaging by 2025, unless specified by customer
requirements such as sterile applications
Our progress in 2023
8
Life cycle assessments completed
We have been working on understanding the environmental
attributes of our products across their whole life cycle. We are also
implementing systems to embed eco-design improvements into our
processes. Our goal is to design new products and, where
appropriate, refresh existing products, in order to reduce our own
environmental impacts as well as that of our customers and
suppliers.
Decarbonising our customers’ industrial processes is a major part of
Spirax Group’s offering. Working with staff at a university campus,
Chromalox’s DirectConnect Medium Voltage electric steam generators
were installed to replace gas powered heating and distribution
systems. The steam generators are highly efficient and have low
installation costs and quick response times compared to traditional
low voltage steam generators.
Alignment with UN SDGs
Progress
In 2023 we started developing sustainability product passports in
Watson-Marlow that identify all the sustainability metrics of our
products to provide clarity for our customers. The passports will be
adapted to adopt new metrics in line with customer questions
highlighted in our Voice of the Customer programmes.
Across the Group, we conducted eight life cycle assessments
(LCAs) in 2023. LCAs support new product development by giving
our engineers key metrics to set targets for improvements. A recent
LCA conducted on one of our soon-to-be-released BioPure
products has proven to show significant reductions. The
assessment, covering all stages of the life cycle, revealed an
estimated 22% reduction in CO2e emissions, with expected
significant reductions in manufacturing and upstream emissions,
benchmarked against a previous LCA conducted in 2021.
Our digital monitoring capabilities are helping customers to
optimise industrial processes and energy use worldwide, reducing
energy consumption and operational spend. For example, Cotopaxi
and Spirax Sarco worked with a multinational food company in 2023
to deliver real time analysis of water, air, gas, energy and steam
(WAGES) through our monitoring system. They identified evaporation
and heat losses and then implemented a heat recovery system.
Spirax Sarco, part of STS, has introduced the Customer
Sustainability Journey (CSJ). The programme provides optimisation
of customers’ steam systems measured against energy, CO2e, water
and financial savings. These can then be managed via a new digital
platform. A CSJ for a customer from the dairy industry focusing on
recovery of energy from the surface blowdown in the steam system
yielded a saving of 6,529GJ of energy, 2,482 m3 of water and 366
tonnes CO2e per year.
Customer environment benefits
Annual estimated customer
CO2 energy and water savings
from a select range of 20
product categories sold in 2023.
To put these savings into
context, that is the
equivalent of:
16.6m
tonnes of CO2
per year
226m
GJ per year of energy
87.1m
m3 per year of water
675m
mature trees
absorbing CO2
2.08m
people’s annual
average energy
consumption (UK)
34,900m
Olympic-sized
swimming pools
of water
Focus for 2024
• Develop and implement a purpose-built eco-design tool that
will standardise environmental assessment across the Group
• Further develop product sustainability passports for some of
our product families highlighting materials, due diligence,
responsible production, efficient design, circularity and
responsible packaging
Spirax Group Annual Report 2023
79
Strategic Report Sustainability Report: Strategic initiatives continued
Sustainable supply chains
Key strategic target
• 80% of strategic and high risk suppliers assessed and
meeting or exceeding our sustainability standards by 2025
Our progress in 2023 (cumulative)
931
76%
Suppliers in the Supplier
Sustainability Portal
Suppliers signed the
Supplier Sustainability Code
Castings project
As part of our scope 3
quantification, we identified that
metal castings are the single largest
commodity for greenhouse gas
(GHG) emissions in our supply
chain. In 2023, we launched a
project to work with casting suppliers
and investigate opportunities to
reduce GHG emissions from these
products, including recycled
materials, circular economy
opportunities and investment in
induction furnaces. The
partnerships from this project will
mean stronger working relationships
as we collaborate to reduce our
impact on the environment.
As a responsible manufacturer, we understand the importance of
our supply chain in meeting our sustainability goals for people and
the planet. We actively develop and educate our suppliers, to
further raise standards and build long-term partnerships that are
mutually beneficial.
By encouraging our suppliers to reduce their environmental
footprint, as well as requiring them to meet our expectations
relating to human rights, we are ensuring that we meet both our
own high standards and the growing expectations of our
stakeholders. This increased monitoring combined with continuous
improvement methodologies will deliver a robust, high performing
supply chain capable of meeting our future needs, which also
delivers for the needs of the planet.
Following on from the launch of our Supplier Sustainability Portal
(Portal) in 2022, we have now successfully onboarded 931
suppliers, in line with our rollout plan. These strategic or higher risk
suppliers have been providing qualitative and quantitative data and
evidence regarding a wide range of sustainability topics, including
resource use, climate impact and human rights. In these suppliers
we are seeing a month-on-month improvement in response rates
against all topics, with response rates up to 59% of respondees for
a questionnaire on product stewardship by the end of February
2024. As the newer suppliers continue to engage and phase one
suppliers, who were part of the initial rollout, further embed, we
expect to see these results continue to improve. We are on track to
meet our 80% target by 2025. Suppliers of our 2022 acquisitions
are not included in these targets yet.
As well as direct monitoring of these strategic and higher risk
suppliers, the Portal also allows for indirect monitoring of a larger
range of suppliers, such as monitoring alerts on potential compliance
issues or areas of concern in news articles, media outlets and other
sources of communication. We are now monitoring 1,973 additional
suppliers indirectly in this way, with all potential flags being reviewed
and assessed internally. In 2023, we had 308 flags from this system,
80
Spirax Group Annual Report 2023
however, many of these are duplicates or related to historic issues.
None of these flags have required immediate intervention. Reviewing
these flags is being incorporated into our supplier management
risk-assessment process.
Signing the Code
In 2022, we reported an expected drop in the percentage of
suppliers having signed the Supplier Sustainability Code (Code) as
we transitioned to a new system of the Code being signed through
the Portal. By the end of 2023, this percentage had increased to
76% (2022: 30%), demonstrating that our suppliers are familiarised
with the new process. Our in-house monitoring systems are
enabling us to focus on and effectively target unsigned Codes.
In 2023, we analysed our supply chain and exited some suppliers,
particularly those who were unwilling to sign the Code or where
standards fell short of those required, as part of this larger review
across the Group.
Alignment with UN SDGs
Focus for 2024
• Incorporate the next phase of suppliers into our Supplier
Sustainability Portal
• Work with suppliers to improve response rates and begin
to assess results
Strategic Report Supporting our communities
Key strategic targets
• Deliver 150,000+ hours (cumulative) of colleague
volunteering globally by 2025
• £2 million of cash or in-kind donations (cumulative) made by
our Group Companies by 2025
• Establish the Group Education Fund and donate up to £15
million by 2030
Our progress in 2023*
25,697
£1,158,284
Volunteering hours
delivered
Donated by the Spirax Group
Education Fund
* Includes recent acquisitions
Group Charitable Fund donations
£’000
£402,900
Volunteering hours
hours
(including acquisitions)
25,697 hours
Operating company cash/in-kind
donations £’000
(including acquisitions)
£340,200
2023
2022
2021
2020
2019
402.9
2023
572.0
2022
25,697
22,140
345.1
2021
11,057
265.8
280.3
2020
3,154
2019
5,311
2023
2022
2021
2020
2019
340.2
349.6
335.6
197.7
188.5
As a Group, we have committed to increasing the wellbeing of
people in our communities, while addressing global sustainability
challenges such as access to education, climate change and
biodiversity loss.
In the 66 countries in which we operate globally, we want to make
life better for the people in our communities. Through charitable
donations and colleague volunteering we share our resources and
expertise to meet local needs, improve access to education and
support longer-term economic wellbeing so that our communities
are stronger and more resilient now as well as in the future.
Alignment with UN SDGs
Progress
Spirax Group Education Fund
In 2023, we continued to invest in local educational needs as
identified by our operating companies in the communities in which
they operate. Since inception, the Spirax Group Education Fund has
approved a total of 100 projects in 38 countries, paying out over £2
million to date. Some of the projects approved across the Group in
2023 include the funding of educational resources for hospitalised
children in France; the funding of academic scholarships for
underprivileged young people in children’s homes and young
people with disabilities in Taiwan; and funding university tuition
fees for five students from an orphanage in Vietnam.
In 2022, we commenced funding towards the construction of a new
school in Egypt with further funds donated in 2023. This school was
completed and opened in October 2023, providing initial places for
96 young students who previously had no access to education in
their local area and either had to walk long distances to school or
did not attend.
Group charitable donations
The Spirax Group Charitable Fund donated over £409,200 to
charitable causes. Some of these donations include: £8,000 to
Young Lives vs Cancer, £30,000 to National Star College and
£40,000 to WaterAid.
Colleague volunteering hours increased by 16% in 2023 compared
to 2022, totalling 25,697 hours of Company time spent volunteering,
with 58,894 hours cumulatively since 2021. Our operating
companies donated £340,200 to charitable causes, in cash or
in-kind (non-cash) donations during 2023.
For our International Day of Charity in September, we supported
Sustainable Development Goal 2 – ‘Zero Hunger’. Against this
objective, 27 activities were reported by 19 operating companies,
delivering 382 volunteering hours.
Matched-giving
A number of earthquakes with devastating effects occurred in
2023. In February, we launched a match-giving appeal resulting in
over £100,000 donated by colleagues and the Spirax Group
Charitable Fund to help those affected by the earthquake in Turkey
and Syria. In addition, in September the Group made a £25,000
donation to support the British Red Cross Morocco Earthquake Appeal.
Focus for 2024
• Support SDG 15 - ‘Life on Land’ for the International Day of
Charity in September
• Continue to develop and refine impact measurements for
the Spirax Group Education Fund
• Embed community engagement culture in recently
acquired companies
• Ensure we continue to have a diverse range of applicants for
the Spirax Group Education Fund, from a wide geographical
and operating company spread
Spirax Group Annual Report 2023
81
Strategic Report Our communities
Enabling future
generations
Building the foundations for a brighter future
The Spirax Group Education Fund (the Fund) is
our commitment to supporting the future of
engineering at a grass roots level. It was established
at the end of 2021 to improve access to education,
tackle poverty through education, remove
barriers and inequality, and improve diversity in
engineering. The Spirax Group Education Fund is
a central source of funding that our operating
companies can apply to, to request money to
meet a locally identified educational need and
build a brighter future together.
By the end of 2023 the Fund has paid out more
than £2 million to over 100 projects, with a
further £600,000 committed for payment in
future years. What’s special about the Fund is
that each project supported has been nominated
by a colleague to improve the lives of people in
their local communities. Each grant awarded is
managed by a local operating company which
means that right across our Group, we’re
working together to provide help where it is
needed most in our local communities.
We are also particularly proud of projects that can
become self-sustaining as a result of our support,
such as the creation of a digital learning hub at
an elementary school serving a remote and
under-privileged community, in Quezon, Philippines.
Joel Flores is Process Industries Leader for
Watson-Marlow based in Southeast Asia. He
explains why he applied for a grant from the
Spirax Group Education Fund.
Number of projects supported by the Spirax Group
Education Fund so far
100+
Total amount paid or committed since launch
£2.8 million
Funds to be donated by 2030
£15 million
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Spirax Group Annual Report 2023
The impact of this investment in the early
education and digital skills of future
generations of engineers will be seen in
years to come, as they embark on their
careers. By equipping and inspiring young
people in the province of Quezon, we are
enabling them to find their role in
delivering a more efficient, safer and
sustainable world in the future.”
Joel Flores
Process Industries Leader,
Watson-Marlow Fluid Technology Solutions
Strategic Report Digital skills powering
sustainable futures
Dunong Cacawayan Elementary School is
located in Infanta Quezon – an under-
privileged area in the province of Quezon,
Philippines, with a population of around 600
people. The school is several miles from the
town, via challenging roads, and despite being
established in 1972 only recently secured an
electricity supply. As the school just has two
functional classrooms, the Rotary Club
of Infanta was looking for support in
constructing a Learning Hub for the students.
“I applied to the Spirax Group Education Fund
for £12,500 to cover the construction costs
of the project and was delighted when I found
out my application had been successful,” said
Joel Flores, Process Industries Leader.
The Learning Hub features a mini library and
computer bank. It is designed to inspire its 83
students and spark an interest in engineering,
but it also gives them access to online
information and digital educational resources
they wouldn’t have had previously, to help
improve their reading, IT and science-based
learning skills.
Digital technology and skills have
revolutionised nearly every part of our daily
lives, and will continue to have a major role to
play in our future, so giving this community
the skills they will need to be a part of this
future is vital.
Longer term, the initiative, along with the
wider curriculum of the school, aims to
provide free access to education regardless
of background, helping to tackle poverty in
the community and improve access to
education now and for years to come.
After receiving the funds in August 2023,
clearing of the site began in September and
construction of the 30m3 Dunong Cacawayan
Learning Hub began in January 2024 and will
complete by the end of March. The local
government will provide ongoing funding to
the facility and it will be monitored by a
community representative from the
Department of Education and the Rotary Club
of Infanta Quezon.
Spirax Group Annual Report 2023
83
Strategic Report TCFD and Climate-related Financial Disclosure (CFD)
Task Force on Climate-related
Financial Disclosures (TCFD)
In accordance with Listing Rule 9.8.6R(8) we confirm that the following table
contains disclosures consistent with the Task Force on Climate-related
Financial Disclosures’ recommendations and recommended disclosures.
Our approach is fully aligned with ten of the 11 TCFD
recommendations and partially aligned with one, which is:
Metrics and targets b) disclose scope 1, scope 2 and, if
appropriate, scope 3 greenhouse gas (GHG) emissions and
the related risks. Throughout 2022, we used a third-party
carbon accounting specialist to help us establish our scope
3 emissions for a baseline year of 2021. In 2023, we calculated
our scope 3 emissions for the 2022 financial year and
improved our methodology to increase accuracy of these data.
Scope 3 emissions for 2021 and 2022 can be found on page
74. Scope 3 is highly complex and requires significant levels
of estimations where data are not available. As we are still
developing our data collection processes for scope 3, reliant
on external support, it was not possible to calculate full
scope 3 emissions for 2023 ahead of the reporting deadline.
We have disclosed a partial scope 3 figure (category 3, B
and C) for 2023, which can be found on page 74 and full
scope 3 emissions for 2022. In 2024, we will be working to
increase the speed of these calculations, with a view to
publishing a full scope 3 analysis in the coming years.
We will review our disclosures against the recommendations
of TCFD on an annual basis.
Governance
Describe the Board’s oversight of climate-related risks
and opportunities
The Board is responsible for the overall stewardship of
strategic risk management and internal control. The Audit
Committee is also directly involved in the detailed review
of risks, including those detailed in these disclosures, and
reports back to the Board on its findings. During 2023, the
Audit Committee received four risk management updates
from the Risk Management Committee’s Chair, and also
reviewed the Principal Risks, as well as the position of
climate change on the Group Risk Register.
Our One Planet: Engineering with Purpose Sustainability
Strategy is an important mechanism by which we seek to
mitigate climate-related risks and maximise climate-related
opportunities. The Board received six updates and the Audit
Committee received two updates from Group Director of
Sustainability during 2023. This included updates on the
Group’s progress against One Planet Sustainability Strategy
targets, TCFD, upcoming changes to regulatory reporting
requirements and information about scope 3 data calculations.
Supporting customers on their decarbonisation journey is
an important element of both our Steam Thermal Solutions
(STS) and Electric Thermal Solutions (ETS) Business strategies.
The Board also provides strategic oversight of these Business
strategies, ensuring that we are mitigating any market-based
risks that could arise as a result of climate change.
Where sustainability, including carbon reduction
investments, is part of a large Capex proposal, these
investments are directly approved by the Board. Climate
impact is considered as one of the factors when making
Capex decisions and in mergers, acquisitions and other
business plans.
Describe management’s role in assessing and
managing climate-related risks and opportunities
The Risk Management Committee has responsibility for
managing climate-related risks. Sarah Peers, Group Director
of Sustainability, had specific delegated responsibility for
overseeing climate-related risks and mitigation activities in
2023. Through her role as a member of the Group Executive
Committee she ensures that climate-related risks and
opportunities are appropriately considered in management’s
day-to-day operational practices.
During 2023, we reviewed the Group’s exposure to risk
using a bottom-up approach, where the Committee sought
views of the Group operating companies on the risks that
they considered may affect their activities to ensure new or
emerging risks are not missed. Following this process, the
Committee reviewed and confirmed the robustness of the
countermeasures that Group operating companies have in
place to mitigate the Principal Risks in the Group Risk Register.
During 2023, management of the Group’s climate change
mitigation activities was overseen by the Board, the Group
Executive Committee and the Group Sustainability
Management Committee (GSMC) utilising the management
structure outlined on page 69. The GSMC comprises the
Group Director of Sustainability, the Business Heads of
Sustainability, Strategic Initiative and Strategic Project
Leads and other relevant individuals. Governance structures
for risk management can be found on page 100.
Management oversight of climate-related risks and
opportunities is embedded within the One Planet
Sustainability Strategy and within our core Business
strategies. Through those strategies, the Group Executive
Committee and Business Executive Committees consider
climate-related risks, opportunities, strategic
implementation and progress against targets.
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Spirax Group Annual Report 2023
Strategic Report Strategy – Acute physical risks
Acute physical risks are event driven, specific episodes that have the potential to inflict significant physical damage
Risk/opportunity
Description
Flooding
– river and
flash flooding
from
precipitation
Windstorm
17% of the Group’s operations by
total insured value (TIV), 42 of 239
locations, are currently exposed to
risk of river flooding, with 28 sites
(13% of TIV value) having 1%
likelihood of river flooding in a year.
TIV at risk is expected to increase
to 19% by 2030, and then remain
stable at 19% to 2050 under a high
(4°C) warming scenario. The Group
has some exposure to heavy rainfall
and potential flash floods with 43%
of the TIV today located in areas
exposed to high levels of precipitation,
which is forecast to increase
slightly to 44% by 2050 under a
high warming scenario. The Steam
Thermal Solutions site in Shanghai,
China, is the highest value asset at
the highest level of risk.
Although a number of sites have
exposure to this flooding, the risk
and potential impact are still
insignificant, with likelihood of
flooding tending towards a
1-in-100-year-type event under
high-warming scenario, RCP8.5
(see page 90).
Under RCP 8.5, it is predicted that
by 2050, 5% of the operations have
a 10% likelihood of flooding in a
given decade.
91 locations (mostly in Europe) are
in regions exposed to strong winds
(accounting for 51% of TIV), with a
1% annual chance of having severe
wind gusts of over 121km/h, with
4 sites having a risk of winds of
161–200km/h. The highest value
asset currently at risk from
windstorm is Watson-Marlow’s site
in Falmouth (UK). TIV at risk from
windstorms is expected to remain
stable to 2050 under a high
warming scenario, but the
frequency of windstorms is likely
to increase over time.
Even under a hothouse world
scenario, the average annual
modelled impact may increase
slightly; however, it would still be
in the insignificant range as per
the Group Enterprise Risk
Management (ERM) scale.
Estimated
financial impact
Low carbon
economy
(RCP 2.6 – 2030)
Hazard exposure
Residual risk profit
impact
Hothouse world
(RCP 8.5 – 2050)
Hazard exposure
Residual risk impact
Link to metrics and
targets
Minor residual risk
impact means that
the we have not
identified this as a
risk that requires a
specific metric or
target. The Risk
Management
Committee reviews
risks on an annual
basis so a future
change in the
residual risk impact
could lead to the
implementation of
a specific metric
or target.
How we manage
and mitigate this risk
These risks are managed through
our Principal Risks 5 (loss of
manufacturing output at any Group
factory) and 7 (loss of a critical
supplier). To mitigate risk, annual
risk assessments are conducted by
our insurance partner and we have
appropriate insurance cover.
Business continuity planning and
capacity planning are in place to
ensure we have spare capacity at
alternative sites and stock is held
locally in sales companies. For key
commodities, where possible, we
seek to maintain dual sourcing to
negate the risk from the loss of a
critical supplier.
In 2024, findings of the climate risk
assessment will be circulated,
particularly with manufacturing
facilities, so that adequate mitigation
measures can be considered and
embedded in their business
continuity plans at a site level.
Low carbon
economy
(RCP 2.6 – 2030)
Hazard exposure
Residual risk profit
impact
Hothouse world
(RCP 8.5 – 2050)
Hazard exposure
Residual risk impact
Minor residual risk
impact means that
the we have not
identified this as a
risk that requires a
specific metric or
target. The Risk
Management
Committee reviews
risks on an annual
basis so a future
change in the
residual risk impact
could lead to the
implementation of
a specific metric
or target.
This risk is managed through our
Principal Risks 5 (loss of
manufacturing output at any Group
factory) and 7 (loss of a critical
supplier). To mitigate risk, annual risk
assessments are conducted by our
insurance partner and we have
appropriate insurance cover.
Business continuity planning and
capacity planning are in place to
ensure we have spare capacity at
alternative sites and stock is held
locally in sales companies. For key
commodities, where possible, we
seek to maintain dual sourcing to
negate the risk from the loss of a
critical supplier.
In 2024, findings of the climate risk
assessment will be circulated,
particularly with manufacturing
facilities, so that adequate
mitigation measures can be
considered and embedded in
business continuity plans at a
site level.
Hazard exposure
Residual risk impact (annual profit)
5
4
3
2
1
Very High
High
Medium
Low
Very Low
5
4
3
2
1
Catastrophic
Major
Moderate
Minor
Insignificant
>£100m
£50m - £100m
£25m - £50m
£10m - £25m
<£10m
Spirax Group Annual Report 2023
85
Strategic Report
TCFD and CFD continued
Strategy – Acute physical risks continued
Risk/opportunity
Description
Fire
12% of the Group’s TIV is today
exposed to at least 20 days per
year of fire weather, with Chromalox’s
Ogden, Utah (USA), site the highest
value asset with some level of risk,
and Chromalox’s Nuevo Laredo,
Mexico, site having the highest
level of risk but a lower TIV.
As global temperatures increase,
the likelihood of fire risk is
expected to increase with 19%
of TIV at risk by 2050 under a
high-warming scenario.
How we manage
and mitigate this risk
This risk is managed through our
principal risks 5 (loss of
manufacturing output at any Group
factory) and 7 (loss of a critical
supplier). To mitigate risk, annual
risk assessments are conducted by
our insurance partner and we have
appropriate insurance cover. We
also conduct occasional
inspections by local fire officers.
Business continuity planning and
capacity planning are in place to
ensure we have spare capacity at
alternative sites and stock is held
locally in sales companies. For key
commodities, where possible, we
seek to maintain dual sourcing to
negate the risk from the loss of a
critical supplier.
Estimated
financial impact
Low carbon
economy
(RCP 2.6 – 2030)
Hazard exposure
Residual risk impact
Hothouse world
(RCP 8.5 – 2050)
Hazard exposure
Residual risk impact
Link to metrics and
targets
Minor residual risk
impact means that
the we have not
identified this as a
risk that requires a
specific metric or
target. The Risk
Management
Committee reviews
risks on an annual
basis so a future
change in the
residual risk impact
could lead to the
implementation of
a specific metric
or target.
Under current conditions, the likelihood of an acute physical risk impacting the Group’s direct operations in a given year is
deemed Unlikely, and the residual impact (post-mitigation) has been assessed as Insignificant (<£10 million).
To mitigate risk, annual risk assessments are conducted by our insurance partner and we have appropriate insurance cover.
Business continuity planning and capacity planning are in place to ensure we have spare capacity at alternative sites and
stock is held locally in sales companies. For key commodities, where possible, we seek to maintain dual sourcing to negate
the risk from the loss of a critical supplier.
In 2024, findings of the climate risk assessment will be circulated, particularly to manufacturing facilities, so that adequate
mitigation measures can be considered and embedded in their business continuity plans at a site level.
For more information about the management of these Principal Risks, see pages 101 to 105
Strategy – Chronic physical risks
Chronic risks arise from longer-term changes in climate pattern, notably drought, heat stress and sea level rise.
Risk/opportunity
Description
Heat stress
Currently 45% of the TIV of the
Group’s operations (112 locations)
is exposed to heat stress, seeing
an average of >20 heatwave days
in a given year with temperatures in
excess of 30˚C. This is expected to
increase to 55% of TIV at risk from
heat stress by 2050, under a high
warming scenario. Examples of
high TIV sites currently at risk from
heat stress include Chromalox
Nuevo Laredo, Mexico; Steam
Thermal Solutions Mexico; and
Chromalox Tennessee (USA). Risks
from heat stress include increased
costs of running HVAC equipment
and potential decrease in
productivity of employees.
Estimated
financial impact
Low carbon
economy
(RCP 2.6 – 2030)
Hazard exposure
Residual risk impact
Hothouse world
(RCP 8.5 – 2050)
Hazard exposure
Residual risk impact
Link to metrics and
targets
Minor residual risk
impact means that
the we have not
identified this as a
risk that requires a
specific metric or
target. The Risk
Committee reviews
risks on an annual
basis so a future
change in the
residual risk impact
could lead to the
implementation of
a specific metric
or target.
How we manage
and mitigate this risk
Many of the operations currently
exposed to heat stress are in
locations where this environment
is expected and well adapted for.
Changing weather location patterns
mean that more sites may move
into areas of heat stress that are
not currently and these sites may
be less prepared.
Operations of Electric Thermal
Solutions, Steam Thermal Solutions
and Watson-Marlow are exposed.
This trend could mean that increased
cooling of buildings and machinery
might be required to reduce the
risk of operational disruption and
also to improve working conditions
for colleagues.
As part of continual asset
management, energy audit and
facilities update processes,
systems will be assessed and
upgraded where necessary.
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Spirax Group Annual Report 2023
Strategic Report Risk/opportunity
Description
Drought
Currently 12% of the TIV of the
Group’s operations (54 locations)
is exposed to drought stress with
three or more drought months per
year. This is expected to increase
under a high warming scenario,
reaching 31% by 2050. An example
of a high value asset with a high
exposure to drought risk today is
Chromalox Nuevo Laredo, Mexico.
Drought may impact the availability
and quality of water, which could
impact manufacturing processes
including product testing.
Drought has the potential to impact
the supply of raw materials where
inland waterways are used for
transportation, impact electricity
availability in locations with a
higher reliance on hydropower
and increase the risk of wildfires.
Sea level rise Risk of exposure from sea level rise
is 10% of assets by value, with no
change expected to 2050. The
Steam Thermal Solutions site in
Shanghai, China, is the highest
value asset at risk.
How we manage
and mitigate this risk
The operations of the Group are
not generally considered water
intensive and therefore the
potential impacts may be
addressed through adaptation
and risk management.
Supply of raw materials and
electricity are managed through
Principal Risk 7, loss of a critical
supplier. Mitigation activities under
this risk include dual sourcing,
managing stock levels for high-risk
commodities and in-sourcing
production where appropriate.
Estimated
financial impact
Low carbon
economy
(RCP 2.6 – 2030)
Hazard exposure
Residual risk impact
Hothouse world
(RCP 8.5 – 2050)
Hazard exposure
Residual risk impact
Link to metrics and
targets
Minor residual risk
impact means that
the we have not
identified this as a
risk that requires a
specific metric or
target. The Risk
Committee reviews
risks on an annual
basis so a future
change in the
residual risk impact
could lead to the
implementation of
a specific metric
or target.
Our exposure under this risk is
no expected to change under a
hothouse world scenario. This risk
is managed under Principal Risk 5,
loss if a manufacturing output at
any Group facility.
To mitigate risk, annual risk
assessments are conducted by our
insurance partner and we have
appropriate insurance cover.
In 2024, findings of the climate
risk assessment will be circulated,
particularly with manufacturing
facilities, so that adequate mitigation
measures can be considered and
embedded in their business
continuity plans at a site level.
Low carbon
economy
(RCP 2.6 – 2030)
Hazard exposure
Residual risk impact
Hothouse world
(RCP 8.5 – 2050)
Hazard exposure
Residual risk impact
Minor residual risk
impact means that
the we have not
identified this as a
risk that requires a
specific metric or
target. The Risk
Committee reviews
risks on an annual
basis so a future
change in the
residual risk impact
could lead to the
implementation of
a specific metric
or target.
The impacts of chronic risks are likely to differ by location, with some countries already experiencing and managing high
levels of heat stress or drought, with the ability to adapt to those conditions. For other locations, historically less used to
drought or heat stress, the impacts could potentially be more disruptive. However, as we are not a highly intensive user of
water and chronic risks can largely be mitigated or adapted, the residual impact (post-mitigation) of chronic physical risks
has been assessed as Insignificant (<£10 million).
Hazard exposure
Residual risk impact (annual profit)
5
4
3
2
1
Very High
High
Medium
Low
Very Low
5
4
3
2
1
Catastrophic
Major
Moderate
Minor
Insignificant
>£100m
£50m - £100m
£25m - £50m
£10m - £25m
<£10m
Spirax Group Annual Report 2023
87
Strategic Report
TCFD and CFD continued
Transition risks/opportunities
Transition risks arise from changes required to facilitate a low carbon economy.
Risk/opportunity
Description
How we manage
and mitigate this risk
Estimated
financial impact
Link to metrics
and targets
Market
transition
Technology
transition
Increasing availability of green
energy could enable electric heating
solutions to replace fossil fuel-
derived steam generation where
carbon emission concerns override
cost differences in the medium to
long term (5+ years). This will provide
opportunities across all geographical
regions and most customer sectors
for our Electric Thermal Solutions and
Steam Thermal Solutions Businesses
as these Businesses combine to
electrify the generation of steam.
Increased cost of electricity provision
and raw materials provides some risk,
as the introduction of carbon taxes
could be passed on in raw material
spend.
Costs of upgrading and installing
infrastructure to support an electric
vehicle fleet, or costs to transition
away from fossil fuel dependent
production equipment.
Reputation
Risk of reputational loss of
Spirax Group as a top performing,
environmentally sustainable business
due to association with fossil
fuel-reliant systems over the medium
to long term (5+ years).
As market leaders in the provision of
thermal energy solutions, mitigating
this risk and maximising the
opportunity is deeply embedded in
the core business strategies of both
our Steam Thermal Solutions and
Electric Thermal Solutions
Businesses. This risk is mitigated
through Principal Risk 6 (inability to
identify and respond to changes in
customer needs). Mitigation includes
regular voice of customer research
and research and development/new
product innovation to lead the way in
providing innovative solutions to
customers. For more information
about the management of this
Principal Risk, see page 104.
The transition to low carbon
technology across our operations is
embedded in our net zero roadmaps
developed by all manufacturing sites
and at a Group level. Fossil fuel-
dependent systems and processes
have been identified and investment
plans developed, through annual and
medium-term financial planning
cycles, to phase the cost of
decarbonisation activities over time,
reducing risk.
This very low risk is mitigated by our
strong reputation, our innovative
product developments, the
introduction of our Natural
Technology marketing strategy,
which correctly positions steam as a
sustainable technology and our own
leading net zero commitments and
progress against them.
Risk
2025
2030
Opportunity
2025
2030
Risk
2025
2030
Opportunity
2025 N/A
2030 N/A
Risk
2025
2030
Opportunity
2025
2030
Net zero
carbon
Sustainable
products
Net zero
carbon
Environment
improvements
Net zero
carbon
Sustainable
products
Estimated financial impact (annual profit)
5
4
3
2
1
Significant
Major
Moderate
Minor
Insignificant
>£100m
£100m - £50m
£50m - £25m
£25m - £10m
<£10m
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Spirax Group Annual Report 2023
Strategic Report
Risk/opportunity
Description
How we manage
and mitigate this risk
Estimated
financial impact
Link to metrics
and targets
This risk is mitigated through our One
Planet Sustainability Strategy,
which includes net zero targets,
energy reduction commitments,
major decarbonisation projects and
conversion to an electric vehicle fleet.
Risk
2025
2030
We manage and monitor existing and
upcoming legislation from a range of
sources to ensure that we are able to
pro-actively respond to upcoming
legislating risks.
Opportunity
2025 N/A
2030 N/A
Climate change litigation risk is
mitigated by our innovative product
developments, the introduction of our
Natural Technology marketing strategy,
which correctly positions steam as a
sustainable technology and our own
leading net zero commitments and
progress against them.
Net zero
carbon
Environment
improvements
Sustainable
products
Sustainable
supply chain
Policy and
legal
transition
Carbon taxation: In country or at
borders, could lead to increased
operational costs. For example, the
EU’s Carbon Border Adjustment
Mechanism (CBAM) became effective
in October 2023, with a two-year
transition period now in operation
before carbon taxation commences
on high carbon imports (such as
steel, iron or aluminium) into the EU.
Building code regulations: Policy
makers may promote a switch to low
carbon buildings, for new builds or
retrofitting old buildings, which could
lead to increased costs, such as
implementing Minimum Energy
Efficiency Standards.
Climate change litigation: Risk arising
from the increasing activism of
shareholders or the public against
companies for failure to adapt to
climate change, greenwashing by
overstating positive environmental
impacts, or understating risks or
insufficient disclosure around
material financial risks. (Risk is
deemed very low for our Group).
Waste-related laws and regulation:
Driven by an aim to increase
circularity of the economy, new
regulations could impact how we
manage waste on our own sites and,
potentially, impact end of life
treatment of products we sell.
Estimated financial impact (annual profit)
5
4
3
2
1
Significant
Major
Moderate
Minor
Insignificant
>£100m
£100m - £50m
£50m - £25m
£25m - £10m
<£10m
Spirax Group Annual Report 2023
89
Strategic Report
TCFD and CFD continued
Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy and financial planning
Growing awareness of climate change and customer
sustainability targets will continue to provide an impetus
for business growth as we provide products, services and
solutions that increase efficiency and reduce customers’
energy use and carbon emissions. To mitigate the risks
outlined above, our One Planet Sustainability Strategy
underpins our Business strategies, which in conjugation
with the voice of the customer and understanding customer
needs, allows us to develop products and services that help
our customers achieve their own carbon reduction targets.
This, in turn, helps us to manage reputational risk by
ensuring we’re driving down our own emissions, in line with
our commitments to the Science Based Targets initiative
(SBTi) and the UN Global Compact.
Each of our three Businesses incorporate sustainability
in their Business strategy, Customer first2, Engineering
Premium Solutions and Strategy25. This has resulted in the
creation of TargetZero solutions to decarbonise the raising
of steam, which was a collaboration between Steam
Thermal Solutions and Electric Thermal Solutions.
As part of our financial planning process, we have an
annual financial plan for sustainability. When considering
sustainability investments, we prioritise initiatives that
deliver the best value of £/tCO2e saved. In 2022, we
developed and commenced implementation of net zero
roadmaps across our manufacturing sites. For more
information about our net zero roadmap, see page 73.
Describe the resilience of the organisation’s strategy,
taking into consideration different climate-related
scenarios, including a 2°C or lower scenario
With customers in almost all industries worldwide and
across 164 countries, steam remains the world’s most
efficient heat transfer medium for a wide range of
applications, with multiple onsite uses from the production
of foods, beverages and medicines, to the generation of
power. Our Steam Thermal Solutions are complemented by
our Electric Thermal Solutions product and service offering.
We thus have a highly resilient business that will remain
relevant across different climate-related scenarios.
As part of our annual viability assessment, we annually
undertake scenario risk modelling focusing on stress testing
the Income Statement and cash flow projections to
determine the resulting impact on the Group’s debt
covenants and liquidity headroom, to ascertain the potential
revenue or adjusted operating profit impacts that could
arise from one, or a combination, of the Group’s Principal
Risks. The key risks associated with climate change would
be mitigated by management processes for three of our
Principal Risks (5, 6 and 7). Modelling completed as part of
our viability assessment suggests that our Principal Risks do
not pose a significant threat to the viability of our Group;
therefore, management believes that this also applies to
climate risk. For more information see pages 42 to 43, 144
and 154.
As well as these ongoing risk management and Principal
Risk Management processes, during 2023 we worked with
Willis Towers Watson to complete quantified scenario
analysis for a range of warming scenarios (a below 2°C
scenario (1.5°C scenario), a 2–3°C scenario and a 4°C
scenario), over multiple timeframes. Physical risks were
assessed under current conditions and projected impact
in the medium term (2030) and long term (2050). These
timeframes align with our One Planet Sustainability
Strategy targets and SBTi approved net zero targets.
The chosen scenarios were in line with the Intergovernmental
Panel on Climate Change (IPCC) representative concentration
and shared social economic pathways (RCPs mapped to
SSPs) RCP 2.6 (SSP1), RCP 4.5 (SSP2) and RCP 8.5 (SSP5)
respectively. The two extreme scenarios were chosen in
order to ‘stress-test’ the impact to the Group under cases of
maximum physical risk impact and maximum transition risk
impact. RCP 4.5 was assessed as a middle scenario.
Physical risks were identified through asset ‘exposure
diagnostic’ analysis for 239 operating locations (comprising
sales and manufacturing companies and sites). The climate
risks were derived from a number of data sources including
Willis Towers Watson’s Global Peril Diagnostic and Climate
Diagnostic tools, data from Munich Re hazard databases
and research in line with the IPCC reports. The findings
were then validated in workshops.
Transition risks were identified and assessed through
multiple workshops, drawing on relevant expertise from
colleagues from across the Group. For this assessment,
one scenario of RCP 2.6 (1.5°C scenario) was considered,
as it is under these conditions that transition risks would be
most relevant. Transition risk exposure was assessed on a
short-term horizon of 2025 and a medium-term time horizon
of 2030 with impacts being assessed as an annualised
amount. Transition risks were not quantified in the longer
term due to the difficulty in building assumptions around the
direction of policy out to 2050 or beyond; physical risks are
anticipated to be more relevant on those timeframes.
In addition, physical risk exposure diagnostic analysis was
completed for 45 of the Group’s suppliers (selected on the
basis of spend, strategic importance, geographic location
o business coverage).
Risk management
Describe the organisation’s processes for identifying
and assessing climate-related risks
The Risk Management Committee holds annual top-down or
bottom-up reviews that provide information and evaluations
that the Committee uses alongside our risk impact, likelihood,
appetite and velocity ratings to create an effective system
for assessing materiality, monitoring, planning and developing
our Group-wide approach and culture regarding risk.
The Risk Management Committee performs a scoring
exercise each year against all our documented risks,
assessing impact, likelihood, control, velocity and appetite
for each risk. Each member of the Committee scores each
risk and the scores are reviewed, discussed and assessed
compared to the other risks. This process is used to assign
the Principal Risks and position of each risk on the Register.
Existing and emerging regulatory requirements related to
climate change are considered as part of this review.
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Spirax Group Annual Report 2023
Strategic Report Risk velocity was deliberated and approved as a further
measure in our Group risk management framework in 2022.
Risk velocity ratings were assigned and validated for all
Principal Risks in 2023, as set out on pages 101 to 105, and
other risks on the Risk Register, including climate change.
Describe the organisation’s processes for managing
climate-related risks
Materiality for climate change risks is based on the
enterprise risk management scales used to determine
materiality across all of our risk management processes.
Climate change-related risks are currently deemed to
be low for the Group (based on assessment of likelihood,
velocity, impact and control) and climate change is not
identified as a Principal Risk on the Group’s Risk Register.
However, a number of the key risks associated with climate
change, e.g. physical risks – notably the impact of a climate-
related event on our direct operations, specifically the loss
of a manufacturing site, or on a critical supplier – and
transition risks, such as failure to meet changing market
needs, are already managed through other Principal Risks
on the Group Risk Register. We therefore believe that our
risk management processes are adequate and appropriate
for the level of risk as applicable to our Group.
For more information about how we manage risk, see the Risk
Management Committee Report on pages 150 to 154
Describe how processes for identifying, assessing
and managing climate-related risks are integrated into
the organisation’s overall risk management
During 2023, we reviewed the Group’s exposure to risk
using a bottom-up approach, where the Committee sought
views of the Group operating companies on the risks that
they considered may affect their activities to ensure new or
emerging risks are not missed. Following this process, the
Committee reviewed and confirmed the robustness of the
countermeasures that Group operating companies have in
place to mitigate the Principal Risks in the Group Risk Register.
Climate change is a risk factor that influences other risks, so
control of climate risk is embedded in and managed through
other Principal Risks, particularly risk 5 (loss of manufacturing
output at any Group facility), risk 6 (inability to identify and
respond to changes in customer needs) and risk 7 (loss of a
critical supplier).
Climate change has risen in position in the Risk Register
over the last few years to position 10. It is considered a
serious, emerging risk though not currently one of the
Group’s Principal Risks.
See the following pages for targets related to:
Net zero carbon and energy use – 72
Environmental improvements in our own operations – 77
Sustainable products – 79
Sustainable supply chain – 80
Metrics and targets
Disclose the metrics used by the organisation to
assess climate-related risks and opportunities in line
with its strategy and risk management process
We have disclosed cross-industry TCFD metrics used to
manage our climate-related risks and opportunities.
Managing our GHG emissions to meet our net zero targets
and helping our customers to do the same mitigates climate
risk by working towards realising a low carbon future.
• Scope 1, 2 and 3 GHG emissions – 74
• Energy use – 75
• Proportion of company vehicles that are EV – 72
• Waste and water – 78
• Climate-related executive management remuneration – 35
• Customer environmental benefits – 79
Group greenhouse gas emissions (scope 1 and 2) are
monitored as a Group key performance indicator (KPI) to
measure successful progress against our strategy. See
pages 34 to 35 for more information on our KPIs. Given the
strong engagement with, and investments in, net zero
initiatives across the Group, an internal carbon price is not
needed. In addition, internally we monitor a number of
opportunity metrics, for example the customer decarbonisation
opportunities pipeline in the Electric Thermal Solutions
Business and metrics related to the launch of our
TargetZero solutions. These metrics are not disclosed
externally as they are commercially sensitive.
In December 2023, we received approval from the SBTi for
our near-term and long-term targets, and net zero target for
2050 in line with a 1.5°C trajectory.
Disclose scope 1, scope 2 and, if appropriate, scope 3
greenhouse gas (GHG) emissions and the related risks
Scope 1, scope 2 and scope 3 disclosures can be found on
pages 73 to 74
During 2022, we used a third-party to help us quantify a full
scope 3 baseline figure for 2021. This figure was calculated
using GHG Protocol-aligned scope 3 methodologies, but is
heavily reliant on estimates and assumptions. In 2023 we
further calculated our scope 3 emissions for the 2022
financial year and improved our methodology to increase
accuracy of this data, restating 2021 as data availability and
accuracy improved.
For more information about the methodology we use to calculate our
scope 1, 2 and 3 emissions and customer savings metrics, see page
75 and a more detailed methodology statement on our website:
spiraxgroup.com/sustainability-downloads
Describe the targets used by the organisation to
manage climate-related risks and opportunities and
performance against targets
Reflecting the central importance of the Group-wide One
Planet Sustainability Strategy to all of our forward-looking
plans, the measures for the 2022 Performance Share Plan
(PSP) changed to include a sustainability measure
accounting for 20% of the PSP opportunity, dependent on
reduction of greenhouse gas emissions (scope 1 and 2) over
three-year periods. For more detail see page 160.
Spirax Group Annual Report 2023
91
Strategic Report Our environment
The future
of sustainable
steam
How our TargetZero
solutions will play an
essential role in enabling
industrial decarbonisation
for the raising of steam.
The decarbonisation of steam generation
is one of the main challenges facing all
industries. Our customers are looking for
solutions to maintain their critical steam
systems while still achieving their stated
sustainability goals. That’s why we are
excited about the potential of our
TargetZero solutions, which decarbonise
the use of steam through electrification
of the heating source, removing the need
to burn fossil fuels.
As a Group, we are committed to
eliminating our scope 1 and 2 greenhouse
gas (GHG) emissions by 2030 and
achieving net zero (scope 1, 2 and 3) by
2050 as part of our One Planet
Sustainability Strategy.
‘Project ClearSky’ is our initiative to
decarbonise the generation of steam
through the elimination of fossil fuels at
our UK manufacturing facility for Spirax
Sarco, part of Spirax Group’s Steam
Thermal Solutions Business. The
60,000sqm facility consumes around
37GW of energy every hour. And, when
the decarbonisation project is complete,
the annual GHGs emitted from the raising
of steam at this facility will reduce from
6,000 tonnes of CO2 (reducing Spirax
Group’s global emissions by over 15%).
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Spirax Group Annual Report 2023
Zero
GHG emissions from the raising
of steam at the site upon
completion
Emissions saved at the site
equivalent to driving an average
internal combustion engine car
138 million
miles
15%+
Reduction in Spirax Group’s
CO2e
Strategic Report Project ClearSky
There are many processes and operations
across industry which rely on steam. To
demonstrate how customers can maintain
their steam systems and meet their net zero
goals, the technology implemented at our
manufacturing site in Cheltenham (UK)
demonstrates what is possible in the
decarbonisation of steam generation.
The practical insights gained throughout this
project put us in a unique position to not only
understand the challenges our customers
face as they strive for net zero emissions, but
also present them with a robust, tried and
tested solution so they can understand how
this technology will help future proof their
own sites.
This project is also a good example of
collaboration across the Group. Firstly, most
of the products that make up this solution are
our own innovations, developed from
proprietary technologies we have in the
Group. Secondly, the delivery of the project
has meant synchronising with numerous
functions including Health and Safety, Supply
Chain and Legal.
We began the project in May 2022 by
decommissioning our Combined Heat and
Power unit, halving the site’s GHG emissions.
We then installed a 9MW power supply in
preparation for the installation of a new 9MW
electrical substation and associated
infrastructure. This will power the Medium
Voltage (MV) heating technology from
Chromalox (part of Electric Thermal Solutions),
which forms the basis of our TargetZero
portfolio of solutions for decarbonising the
raising of steam and sits at the heart of the
site’s new steam generation capabilities.
The first of our three TargetZero solutions to
be powered up will be the SteamBattery, a
thermal energy storage system capable of
generating steam from renewable or off-peak
electricity. Following this, our second solution,
SteamVolt a first-fit boiler solution that uses
electric heat and control technology, will go
online. It is at this point that we will have
decarbonised the generation of steam at our
site. However, we will also be deploying our
third solution, ElectroFit, a retrofit boiler
solution that converts fossil fuel fired boilers
to electric. This solution will become our back
up boiler.
This holistic approach means we are able to
achieve the emissions reduction fundamental
to our targets as outlined by our One Planet
Sustainability Strategy and demonstrate the
impact of our solutions for customers.
Spirax Group Annual Report 2023
93
Our goal is to quite literally ‘clear the skies’
of the emissions associated with steam
generation and other industrial heat
applications creating a better world for
future generations by facilitating the
switch to a greener technology.”
Allison Lappe
Associate Manager, Research & Development Engineering,
Chromalox, Electric Thermal Solutions
Project ClearSky is a transformational
project that marks a step change in how
we understand our customers’
decarbonisation challenges and support
them in future proofing their operations.”
Mark Sadler
Head of Strategic Projects, Spirax Sarco,
Steam Thermal Solutions
Strategic Report Non-financial and sustainability information statement 2023
This Annual Report and in particular the Sustainability Report, contains the
information required to comply with the Companies, Partnerships and
Groups (and Non-Financial Reporting) Regulations 2016, as contained in
Sections 414CA and 414CB of the Companies Act 2006. The table below
provides key references to information that, in conjunction with the
Sustainability Report, comprises the Non-Financial and Sustainability
Information Statement for 2023.*
Reporting requirement
Group policies that guide our approach
Information and risk management, with page references
Environmental matters
• Group Sustainability Policy
• Group Environmental and Energy Policy
• Group Management Code
• Supplier Sustainability Code
Employees
Social matters
Respect for human rights
Anti-corruption and anti-bribery
matters
• Group Diversity and Inclusion Policy
• Group Management Code
• Group Human Rights Policy
• Group Sustainability Policy
• Group Health and Safety Policy –
Statement of Intent
• Group Human Rights Policy
• Group Charitable Donations Policy
• Group Employee Volunteering Policy
• Supplier Sustainability Code
• Group Sustainability Policy
• Group Human Rights Policy
• Modern Slavery Statement
• Supplier Sustainability Code
• Group Anti-Bribery and Corruption
Policy
• Group Gifts, Entertainment and
Hospitality Policy
• Group Competition Law Compliance
Policy
• Group Whistle-Blowing Policy
• Supplier Sustainability Code
Sustainability Report, pages 70-80
Principal Risks, pages 104-105
TCFD and CFD Disclosures, pages 84-91
Our business model, pages 18-19
Section 172 Statement, pages 121-123
Company Purpose, page 107
Sustainability Report, pages 62-68
Our business model, pages 18-19
Colleague Engagement Committee Report, pages
128-131
Section 172 Statement, pages 121-123
Company Purpose, page 107
Sustainability Report, pages 63-69, 81-83
Our business model, pages 18-19
Section 172 Statement, pages 121-123
Company Purpose, page 107
Sustainability Report, pages 80
Principal Risks, page 105
Risk Management Committee Report, page 152
Sustainability Report, pages 69
Principal Risks, page 105
Risk Management Committee Report, page 105
Description of the business model
Description of the Principal Risks in relation to the above matters,
including business relationships, products and services likely to affect those
areas of risk, and how the Company manages the risks
Non-financial key performance indicators
Our business model, pages 18-19
Risk Management, pages 101-105
Risk Management Committee Report, page
151-154
TCFD and CFD Disclosures, page 84-91
Sustainability Report, pages 62, 67-68, 70-81
Key Performance Indicators, pages 34-35
* The policies listed above can be found on our website: spiraxgroup.com/governance-documents. Compliance with our policies is monitored
through the implementation of our Sustainability Strategy, through our Internal Audit function and, locally, by our General Managers.
We have disclosed, to the fullest extent possible, against the requirements of the Industrial Machinery & Goods Standard
of the Sustainability Accounting Standards Board (SASB), in respect of 2023, which can be found on our website
spiraxgroup.com/sustainability-downloads.
In line with the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022, we have disclosed
fully against these requirements, which can be found in our TCFD report on pages 84-91.
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Spirax Group Annual Report 2023
Strategic Report Our policies
Group Governance Policies
Group Management Code
Anti-Bribery and Corruption Policy
Group Whistle-blowing Policy
This Code sets out the Group’s policy on the operation of its Businesses and the procedures,
controls and senior manager certification that provide the means to achieve compliance
with the Code throughout the Group and to achieve continuous improvement in the
Group’s performance.
It is Group policy to conduct its business free of any bribery or corruption. The Group will
not enter into contractual relationships with third parties that are known to engage in corrupt
practices and will not engage in the giving or receiving of bribes or favours that create a
conflict of interest. Anti-bribery and corruption training forms part of our Group Essentials
Training and must be completed by all new employees and annually thereafter.
We are committed to conducting our business with honesty and integrity and we expect all
colleagues to maintain high standards in accordance with our Group Management Code and
our core Values. A culture of openness and accountability is essential to prevent any situations
occurring and to address them when they do occur. This policy aims to encourage colleagues
to report suspected wrongdoing as soon as possible, in the knowledge that their concerns
will be taken seriously and investigated as appropriate and that their confidentiality will
be respected.
Competition Law Compliance Policy
It is Group policy to conduct business in accordance with the competition laws of all the
countries in which we operate. This policy outlines standards of conduct and integrity we
expect from all colleagues and the potential consequences of breaching competition laws.
Gifts, Hospitality and
Entertainment Policy
This policy sets out the Group’s position on the giving and receiving of gifts, hospitality
and entertainment, and our colleagues’ responsibilities under this policy.
Charitable Donations Policy
Environmental Policies
Group Sustainability Policy
Group Environmental and Energy Policy
Supplier Sustainability Code
This policy sets out the principles to be adopted in relation to charitable donations, both cash
and in-kind, and applies to all charitable donations and community engagement activities
across the Group.
This policy outlines the standards and commitments by which we guide operations at our
Group Functions, operating companies and colleagues of Spirax Group in a socially and
environmentally responsible manner. While these standards and commitments guide our own
operations, we also encourage suppliers and partners to abide by the standards outlined in
this Policy.
This policy underlines the commitments made in our One Planet: Engineering with Purpose
Sustainability Strategy with regard to protection of the environment, climate change and the
efficient use of resources, including water, waste management and biodiversity enhancement.
The Code represents the minimum standards that we ask our suppliers and their sub-tier
suppliers to adhere to when conducting business with Spirax Group. It covers expectations
relating to human rights, health and safety, quality management, environmental sustainability
and ethics.
Colleague and Human Rights Policies
Employee Volunteering Policy
All Group colleagues are entitled to up to three days of volunteering leave per year. This policy
is intended to help and support colleagues wishing to volunteer and provides a framework for
good practice.
Group Health and Safety Policy –
Statement of Intent
This statement outlines the commitments of intent that our Group Functions and operating
companies must adhere to, in order to ensure that Health and Safety remains a core Value and
our first consideration.
Spirax Group Annual Report 2023
95
Strategic Report Our suppliers
Embedding
sustainability
into our future
Working together to achieve
a more sustainable future
We only work with suppliers who align with our
Values and agree to comply with our Supplier
Sustainability Code (the Code). This ensures we
are always working with suppliers who want to
go beyond our minimum standards, doing all that
we can together to ensure our supply chain
operates ethically and upholds the standards we
believe in.
In 2022, as part of a wider initiative to use digital
enhancement to deliver resilient business
operations, we launched our Supplier
Sustainability Portal (the Portal). This has several
key benefits:
• It enables us to assess supplier sustainability
performance and risk
• It provides direct suppliers with a platform
through which they can sign and commit to the
Code
• It is an online resource centre designed to help
develop their knowledge around sustainability
Overall, we plan to onboard 1,600 direct
suppliers into the Portal, through a strategic
phased approach, and we have achieved over
50% of that target to date.
Suppliers are required to complete a series of
surveys including climate impact, human rights,
human trafficking and slavery and a Spirax
Group bespoke survey covering biodiversity,
community engagement and inclusion, as well as
diversity in the supply chain. In addition, the
data gathered through the climate impacts
survey in particular helps us develop a clearer
picture of our scope 3 greenhouse gas
emissions and understand where our suppliers
are on their sustainability journey to identify
improvements.
Through the Portal, suppliers have quick access
to definitions of terms in eight languages, as well
as links to more information should they need it.
They can participate in training modules and
tutorials through the Portal’s virtual library and
live webinars on how to use the Portal, the
surveys and regulatory updates.
It is not just our suppliers who have access to
training materials in our Portal. Our buyers also
have access to over 40 training modules to
enable them to develop a better understanding
of where sustainability improvements can be
made within our supply chain. Educating our
purchasing teams not only helps them to make
more sustainable decisions but also equips them
to advise and guide our suppliers when they
need it.
Our commitment to make a positive contribution
for a better world is enshrined in our One Planet
Sustainability Strategy and our supply chain
collaboration is one of the key ways in which we
can unite across industry to leave a lasting
legacy for future generations.
1,841
direct suppliers signed the Supplier Sustainability Code
96
Spirax Group Annual Report 2023
Strategic Report Spirax Group Annual Report 2023
97
Strategic Report Risk Management
Effective risk management remains
fundamental to the resilience of our Group.”
Nimesh Patel
Group Chief Executive Officer
Our approach and appetite for risk
During 2023, the Risk Management Committee was chaired
by Nick Anderson, prior to his retirement. The Risk
Management Committee monitors our operational risks, in
particular those identified as Principal Risks, on an ongoing
basis, while the Board is responsible for the overall
stewardship of strategic risk management and internal
control. The Audit Committee is also involved in the detailed
review of risks reporting to the Board on its findings.
We hold annual reviews, alternating each year between
top-down or bottom-up, that provide information and
evaluations that the Committee uses alongside the Risk
Appetite and Risk Velocity ratings for our Principal Risks to
create an effective system for monitoring, planning and
developing our Group-wide approach and culture regarding
risk.
The senior managers of our operating companies are
involved in the risk assessment process. The evaluations
of the Committee, including setting the appropriate levels
of risk, are then communicated to all Group operating
companies.
This ongoing monitoring and engagement contribute to
the Group’s Risk Register and the way we manage our risks.
As they are dynamic and fluid, both our Risk Register and
Principal Risks reflect the current conditions across the
Group, together with the external macroeconomic
environment, and guide our ongoing monitoring and
mitigation activities.
Key risk management actions
The following key actions were undertaken by the Group
during 2023 in addition to the regular monitoring of risks:
• Bottom-up risk review: the Committee received input from
its Group operating companies resulting in the
identification of a new risk in our Risk Register: Ineffective
IT Systems
• Risk Register: the bottom-up risk review informed the
annual review, validation and update of the Risk Register
• Digital Services: the risk of failing to respond to changes
in our customer’s Digital requirements was identified as
requiring dedicated focus and our Principal Risks were
realigned accordingly with the inclusion of a new sub-risk:
Inability to Identify and Respond to Changes in Customer
Needs – Digital
• In light of the current geopolitical and macroeconomic
forces impacting a number of countries in which the
Group operates, the Group has considered and adapted
its strategies in response to evolving risks
• Enterprise Risk Management: the recommendations of our
Enterprise Risk Management review undertaken in 2022
were agreed and a blueprint created for implementation
• Risk Appetite Statement: the Risk Management
Committee confirmed the statement, which can be found
on pages 153-154
Further reading
Our Principal Risks See pages 101 to 105
The Committee’s analysis of the Principal Risks affecting the Group,
before mitigation, is set out on pages 101 to 105.
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Spirax Group Annual Report 2023
Strategic Report Governance and Compliance
Recognising the growing geopolitical tensions and
corresponding effects on world trade, continued
acceleration for demand of digitalised products and
solutions together with relatively high levels of inflation and
increases in cost of living, we decided in 2023 to reinforce
our focus on governance and compliance which sits at the
heart of our risk management framework. This focus has
culminated in a number of key steps taken in 2023, including
a refresh of our Group Sanctions Policy, the creation of a
new position with the Group Head of Product Compliance
and a refresh of our Treasury and Tax policies (including the
prevention of Criminal Evasion of Tax). Our IT teams have
also embedded stronger internal governance and controls in
the field of information security. We will continue to assess
the robustness of our governance and compliance
programmes and controls in the context of prevailing
economic, political and social forces and respond in the
manner which enables our Group to mitigate the challenges
presented by such dynamic risks.
Risk Register review
Following the annual review of the Risk Register, Principal
Risks and the responses from the bottom-up risk review, as
compared to 2022, Failure to Realise Acquisition Objectives
and Inability to Identify and Respond to Changes in
Customer Needs (Digital/Non-Digital) were elevated as
Principal Risks on recommendation of the risk owners.
Subsequently, Loss of Manufacturing Output at any Group
Factory, Loss of Critical Supplier and Breach of Legal &
Regulatory Requirements (including ABC Laws) were
lowered in ranking. Ineffective IT Systems was also
introduced as a new risk in the Risk Register, although not a
Principal Risk.
The year-on-year trend for each Principal Risk was
assessed and updated; Risk Appetite and Risk Velocity
ratings were also validated for each of the Principal Risks.
Ineffective IT Systems was assigned a Risk Velocity and
Risk Appetite rating given its addition to the Risk Register in
2023.
Climate Change
Climate Change risk is broken down into two categories:
physical risks (such as increased frequency and severity of
extreme weather events), and the impacts of such events
and climatic changes on the Group’s operations (including
supply chains); and transition risks (arising from political,
economic and societal shifts to a low-carbon economy).
Climate change is accelerating. The most recently published
Report by the Intergovernmental Panel on Climate Change
noted that global surface temperatures were 1.1˚C higher in
2011-2020 than 1850-1900 (with land surface temperatures
an average of 1.6˚C higher). In 2023 we worked with our
global insurance broker, Willis Towers Watson, to assess the
likely impact of extreme weather events on our Group
operating companies. The results of the assessment
revealed that, under current conditions, the residual impact
of such risks for our Group is insignificant.
However, Climate Change continues to be an emerging risk
that we will closely monitor in light of national and global
developments and features as a risk on our Risk Register.
Our climate risk is managed holistically by the Committee
with regular updates to the Group Executive Committee and
the Board. We also continue to follow the framework set by
the Task Force on Climate-related Financial Disclosures
(TCFD) to enable the transition to a low-carbon economy.
Our TCFD disclosures are set out on pages 84 to 91 of the
Sustainability Report.
Emerging risks
The Risk Management Committee and the Board are
actively involved in assessing emerging and over-the-
horizon risks and opportunities. In 2023, an example of this
was highlighted in the Group’s decision to purchase a 15%
stake in the Norwegian thermal battery company, Kyoto
Group. The transaction enables the Group to work closely
with Kyoto and enter into agreements to accelerate the
decarbonisation of industrial process heat using the
technology in Kyoto’s Heatcube, a molten salt thermal
energy storage solution. This is an example of our appetite
for new-to-world decarbonisation solutions to serve our
customers’ evolving industrial needs.
Spirax Group Annual Report 2023
99
Strategic Report Risk Management continued
Managing risks
Board
Reports to
Audit Committee
Works with
Risk Management Committee
Oversees risk management processes and procedures and monitors mitigating actions put in place by the Group. Works with the
Audit Committee to monitor the effectiveness of internal controls and the audit process, including ‘deep-dives’ into specific risks
Top down review
Risk review (external/internal)
Carried out at regular intervals
Risk assurance
Internal audit (ongoing review of effectiveness by the Audit Committee and Risk Management Committee)
Group-wide Risk Register
Maintained and reviewed by the Risk Management Committee
Bottom-up review
Group operating companies
Further reading
Risk Management Committee Report See pages 150 to 154
Our Viability Statement See pages 42 to 43
Our Going Concern Statement See page 41
TCFD Disclosures See pages 84 to 91
100
Spirax Group Annual Report 2023
Strategic Report Principal Risks
The following pages set out the Group’s Principal Risks, as validated by the Risk Management
Committee and describes the links to strategy, the mitigation measures, the velocity of each risk
and the appetite for each risk. The risk trend shown is the risk before mitigation measures have
been implemented. The risk appetite and risk velocity ratings are after mitigation has been
taken into account.
Principal Risks
1. Economic and political instability
Risk appetite ratings defined:
Description
Velocity
Very low Following a marginal-risk, marginal-reward approach that represents the safest
2. Significant exchange rate movement
strategic route available.
3. Cybersecurity
4. Failure to realise acquisition objectives
Low
Seeking to integrate sufficient control and mitigation methods in order to
accommodate a low level of risk, though this will also limit reward potential.
5. Loss of manufacturing output at any
Balanced An approach which brings a high chance for success, considering the risks,
Group factory
along with reasonable rewards, economic and otherwise.
6. Inability to identify and respond to
changes in customer needs: Digital/
Non-Digital
7. Loss of critical supplier
8. Breach of legal and regulatory
requirements (including ABC laws)
Strategic priorities
Increase direct sales effectiveness
through market sector focus.
Develop the knowledge and skills of
our expert sales and service teams.
Broaden our
global presence.
Leverage our
R&D investments.
Optimise our supply
chain effectiveness.
High
Willing to consider bolder opportunities with higher levels of risk in exchange
for increased business payoffs.
Very high Pursuing high-risk, sometimes unproven options that carry with them the
potential for high-level rewards.
Risk velocity ratings defined:
Description
Velocity
Very low Very slow impact, response time adequate to mitigate effects
Low
Slow impact, robust response to strategy may mitigate effects
Medium
Moderate time to impact, swift and robust response may
mitigate effects
High
Fast impact, immediate response may mitigate effects
Very high Very rapid impact with little or no warning. Limited time to
respond and mitigate effects
Timeframe
Felt after
12 months
Felt within
12 months
Felt within
6 months
Felt within
a month
Felt within
a week
Operate sustainably and help
improve our customers’ sustainability.
Risk likelihood, control and impact
Ranking
Increase
from FY2022
No
change
Decrease
from FY2022
Impact
High
Medium
Low
Control
High
Medium Low
Risk velocity
High
Medium
Low
Economic
4
2
1
8
P
e
o
p
l
e
7
3
6
5
p e rational
O
Likelihood
V e ry low
Very
high
Spirax Group Annual Report 2023
101
Strategic Report
Risk Management continued
Principal Risks continued
Principal Risk and
why it is relevant
Trend
Risk
velocity
Key mitigation, sponsor
and explanation of change
1. Economic and political instability
Risk
appetite
rating
Rationale for rating
• Strong internal controls, including internal
Very high
High
Balanced
Low
Very low
audit and appropriate insurance
• Operating in line with the Group Treasury
Policy, including currency exchange
hedging and cash pooling arrangements
• Externally-facilitated scenario
planning exercises
• Resilient business model, strengthened
by regular strategic business reviews
• Well spread business by geography
and sector
• Increased liquidity through more headroom
on Group debt facilities
Executive sponsor:
Group Chief Executive Officer
Change:
No change.
We have the track record
and local insight to
successfully
manage unique
challenges
in economically and
politically volatile
territories. We are
willing to accept these
challenges where
opportunities for
growth exceed the
impact of this risk.
Very high
High
Balanced
Low
Very low
We take a balanced view
of this risk which arises
as a direct result of our
global presence, but our
geographic spread means
we are not wholly
dependent on any
one currency.
• Maintain the spread of manufacturing
across currency areas
• Consideration of exchange rate exposures
in the manufacturing strategy
• Forward cover where appropriate and in line
with the Group Treasury Policy on hedging
currency exchange movements
• Focus on reducing manufacturing cost,
including sourcing materials from cheaper
markets, and purchasing in the UK in
foreign currency
• Deployment of price management tools
Executive sponsor:
Chief Financial Officer
Change:
This risk has increased to reflect the increasing
volatility of foreign exchange rates across both
developed and developing economies that we
have witnessed over the past year.
Leverage our R&D investments.
Optimise supply chain effectiveness.
Operate sustainably and help improve our
customers’ sustainability.
Trend
Risk increased.
No change to risk.
Risk decreased.
→ Very high
High
Medium
Low
Very low
The Group operates
worldwide and maintains
operations in territories
that have historically
experienced economic or
political instability,
including regime
changes. In addition to
the potential impact on
our local operations, this
instability also increases
credit, liquidity and
currency risks.
Link to strategic priority:
2. Significant exchange rate movement
↑ Very high
High
Medium
Low
Very low
The Group reports its
results and pays
dividends in sterling.
Sales and manufacturing
companies trade in local
currency. With our local
presence in markets
across the globe, the
nature of our business
necessarily results in
exposure to exchange
rate volatility.
Link to strategic priority:
Link to strategic priorities
Increase direct sales effectiveness
through market sector focus.
Develop the knowledge and skills of our
expert sales and service teams.
Broaden our global presence.
Direct link
Indirect link
102
Spirax Group Annual Report 2023
Strategic Report
Principal Risk and
why it is relevant
Trend
Risk
velocity
Key mitigation, sponsor
and explanation of change
Risk
appetite
rating
Rationale for rating
3. Cybersecurity
Cybersecurity risks
include theft of
information, malware,
ransomware and
compliance with evolving
statutory and legislative
requirements. Risks may
manifest through a direct
attack on our business or
through our supply chain.
→ Very high
High
Medium
Low
Very low
Link to strategic priority:
4. Failure to realise acquisition objectives
↑ Very high
High
Medium
Low
Very low
The Group mitigates
this risk in various ways,
including through
comprehensive due
diligence, professional
advisers, contractual
protections and
comprehensive
integration planning.
However, there are some
variables that are difficult
to control, such as
adverse economic
conditions, or the loss of
key employees, which
could impact acquisition
objectives.
Link to strategic priority:
• Global assessment of our IT environment
Very high
High
Balanced
Low
Very low
against UK cyber essentials framework and
prioritising actions for improvement
• Deploying security tools to limit the impact
and spread of ransomware
• System access rights regularly reviewed
• Further strengthening of security for
centrally-managed systems for heightened
protection and consistency
• Mandatory cyber awareness training is
delivered to all staff electronically each year
Concerns of potential
impact on the business,
in addition to the
important considerations
surrounding protection of
personal data, reinforce
our commitment to
implement and maintain
robust security measures
across the Group.
Executive sponsor:
Group IT Director
Change:
No change.
Thorough planning and
proper due diligence can
mitigate many of the
potentially risky aspects
of an acquisition.
Implementation plans
must be well-developed
and carefully pursued to
achieve the full strategic
and financial benefits.
• Regular review of acquisition criteria in line
Very high
High
Balanced
Low
Very low
with strategic plan
• Board approval of integration plans for
major acquisitions
• Scrutiny of targets and implementation plans
by external advisers and internal key players
• Use of retainer/escrow to provide protection
against warranty claims
• Use of insurance as protection against seller
breach and non-disclosure
• Ensuring valuation models show a healthy
return on investment
• Regular monitoring of performance by the
Board against the approved investment case
Executive sponsor:
Group Chief Executive Officer
Change:
The risk has increased due to the combined
size of the two acquisitions undertaken in 2022
(Vulcanic and Durex Industries) and reflecting
the impact should the Group fail to realise its
acquisition objectives.
Spirax Group Annual Report 2023
103
Strategic Report
Risk
appetite
rating
Very high
High
Balanced
Low
Very low
Rationale for rating
While we have mitigated
this risk through a
geographic spread of
factories, calculated
replication of capacity
and management of
stock, we have a low
appetite for this risk due
to the potential negative
consequences to the
Group and its customers.
Risk Management continued
Principal Risks continued
Principal Risk and
why it is relevant
Trend
Risk
velocity
Key mitigation, sponsor
and explanation of change
5. Loss of manufacturing output at any group factory
↓ Very high
High
Medium
Low
Very low
The risk includes loss
of output as a result
of natural disasters,
industrial action,
accidents or other
causes. Loss of
manufacturing output
from our larger plants
risks serious disruption
to Group sales.
• New facility for Watson-Marlow Fluid
Technology Solutions in North America
• Expansion of capacity planned for
Thermocoax in France and BioPure in the UK
• Capacity planning and holding stock in
sales companies
• Conducting audits/inspections
• Annual risk assessments and business
continuity planning
• Reviewing and maintaining appropriate
insurance cover
• Continuing commitment to employee
policies, ensuring satisfactory benefits and
regular communication with all employees
• Comprehensive manufacturing footprint
project undertaken
• Investment in new sites to open alternative
lines of supply
Executive sponsors:
Managing Directors of Steam Thermal
Solutions, Electric Thermal Solutions and
Watson-Marlow Fluid Technology Solutions
Change:
This risk has decreased as the risk is lower
than in the Covid Pandemic. Risk of labour and
materials shortage is also lower than the
previous year.
Link to strategic priority:
6. Inability to identify and respond to changes in customer needs: digital/non-digital
This risk could lead to
a reduction in demand
from a failure to respond
to changes in the needs
of customers or
technology shifts.
→ Very high
High
Medium
Low
Very low
Very high
High
Balanced
Low
Very low
The Group continues
to focus on its market
awareness, invests in
technical and sales
knowledge via the Spirax
Sarco Academy and,
through Customer first
sectorisation, seeks to
be more closely attuned
to its customers. There is
a good level of control
effectiveness, but a low
appetite for this risk.
• Stronger presence of sales engineers,
compared with competitors, in the
marketplace
• Acquisition of Durex Industries and the
Vulcanic Group to better position the Group
in meeting customer demand in the
transition to more sustainable industries
• New product ideas generated by market
development managers from close alignment
with sales engineers and customers
• Sales and competitor analyses undertaken
to identify any trends or technology shifts
• Digital strategies for each Business are
either underway or under preparation with
longer term implications on investment,
resource levels, new skills and need to
develop external partnerships
• A Group Digital Director leading the Group
Digital Strategy
• Acquisition of Cotopaxi to further accelerate
the Group digital learning curve
Executive sponsors:
Managing Director, Steam Thermal Solutions
and Group Digital Director
Change:
No change.
Link to strategic priority:
104
Spirax Group Annual Report 2023
Strategic Report
Principal Risk and
why it is relevant
Trend
Risk
velocity
Key mitigation, sponsor
and explanation of change
7. Loss of critical supplier
Risk
appetite
rating
Rationale for rating
This risk relates to the
loss of a critical supplier
that could result in
manufacturing
constraints and delayed
deliveries to customers.
↓ Very high
High
Medium
Low
Very low
• Improved supplier risk assessments and
Very high
actions to create supply chain alternatives
• Supplier selection processes have been
improved with increased importance placed
on product quality, product delivery,
financial stability and supplier sustainability
High
Balanced
Low
Very low
Our expenditure with
suppliers is not heavily
concentrated in any
one supplier or group
of suppliers.
• Supplier development and supplier
management resources have been
strengthened
• As part of our procurement strategy, we are
securing more robust sources of supply
• Dual sourcing strategies for critical suppliers
and critical parts give us greater flexibility in
our supply chain
• Continued with global market assessment
exercises to establish correct price points
and mitigate
• Price increases
Executive sponsors:
Business Supply Heads
Change:
This risk has decreased as turbulence in our
upstream supply chain has abated as markets
have grown to accept a new normal which
includes a greater level of turbulence than in
historical times and inflation on commodities
has eased.
Link to strategic priority:
8. Breach of legal & regulatory requirements (including ABC laws)
→ Very high
High
Medium
Low
Very low
We operate globally and
must ensure compliance
with laws and regulations
wherever we do business.
As we grow into new
markets and territories
we continually review
and update our operating
procedures and ensure
our colleagues are fully
informed and educated
in all applicable legal
requirements, such as
with respect to anti-
bribery and corruption
(ABC) legislation.
Breaching any of these
laws or regulations
could have serious
consequences for
the Group.
Link to strategic priority:
We abide by the laws,
rules and regulations of
the jurisdictions in which
we operate and given the
serious consequences
for breaching these laws,
rules and regulations, we
have a very low appetite
for this risk.
• Ongoing global monitoring of commercial
Very high
High
Balanced
Low
Very low
arrangements and agreements, with
appropriate professional advice
• Established procedures to maintain
accreditations
• Annual Group-wide ABC training improved
with a new programme
• Multi-lingual, multi-national secure
whistle-blowing hotline
• Group Litigation Report and ongoing
monitoring of cases
• Regular updates on Corporate Governance
and Stock Exchange rules
• General Data Protection Regulation
compliance plan in place
• Conducting supplier audits
• Engaging suppliers to commit to compliance
with the principles of the Supplier
Sustainability Code
Executive sponsor:
Group General Counsel
Change:
No change.
Spirax Group Annual Report 2023
105
Strategic Report
Governance Report
Our Governance
Leading effective governance to ensure the successful
management of the Group across its diverse Businesses
Welcome to our 2023 Governance Report. In this Report you can see the
composition of our Board and our Group Executive Committee and find out how
our governance framework for planning, implementation and monitoring of Spirax
Group’s performance ensures we are well placed to respond and adapt to the
changing environment.
The Disclosure Guidance and Transparency Rules (DTR) require a company to
include in its Directors’ Report a governance statement containing certain
information. However, as allowed by DTR 7.2.9, we have chosen to set out the
information in this governance section of the Annual Report. The Group’s risk
management and internal control framework and the Principal Risks and
uncertainties, described on pages 98 to 105, the Directors’ Report on pages 179
to 182 and the various Committee Reports on pages 128 to 160 also contained
required information and are incorporated into this statement by reference.
In this section
107 Board leadership and Company Purpose
107 Chair’s introduction
110 Governance at a glance
112 Board of Directors
114 Our Group Executive Committee
115 The Board at a glance
116 Case study: Engineering our future, together
118 Board activities
120 Leading with purpose
121 Section 172 Statement
124 Division of responsibilities
125 Governance framework
106
Spirax Group Annual Report 2023
126 Board composition, succession and evaluation
128 Committee Reports
128 Colleague Engagement Committee Report
132 Nomination Committee Report
138 Audit Committee Report
150 Risk Management Committee Report
155 Remuneration Committee Report
161 At a glance summary: Executive Directors’
remuneration
162 Annual Report on Remuneration
175 Summary Remuneration Policy
179 Regulatory disclosures
184 Statement of Directors’ Responsibilities
Board leadership and Company Purpose
Chair’s introduction
We continue to be directly involved with ESG
as it is at the heart of our Group’s core activities
and given its importance to shareholders and
wider stakeholders.”
Jamie Pike
Chair
We also indicated last year I would be stepping down in
2024 following my reappointment for a further three years
in 2021. The Board considered that the reappointment
would be compliant with Provision 19 of the UK Corporate
Governance Code 2018 (the Code), which allows for an
extension beyond nine years’ service as, although I have
been a Non-Executive Director since 2014, I was only
appointed as Chair five years ago, in 2018. The Nomination
Committee is currently engaged in the search and
appointment for the Chair succession and further
information on this can be found in the Nomination
Committee and Directors Reports on pages 132 and 179.
Following the resignation of Olivia Qiu in January 2023 the
Nomination Committee began the process of finding a new
Non-Executive Director. We announced the appointment of
Constance Baroudel on 2nd August 2023. Constance brings
to the Group strong sustainability, financial, strategic and
non-executive experience as well as her knowledge of
large, global organisations, to support the ongoing
sustainable growth and success of our Group.
As illustrated in the Board biographies on pages 112 and 113
and the Board at a glance (as at 31st December 2023) on
page 115, we continue to ensure that our Board is diverse
ethnically, culturally and in terms of gender. In order to
create more transparency around this matter, the Financial
Conduct Authority (FCA) introduced new listing rules,
effective for accounting periods starting on or after 1st April
2022 (which we have disclosed voluntarily in previous
years), this can be found in the Directors Report on page
179.
Our Purpose
Our Purpose, to create sustainable value for all our
stakeholders as we engineer a more efficient, safer and
sustainable future, helps our Group Businesses to stay
relevant in a fast-changing world. It drives our direction and
priorities and connects us with the communities of which
we are part. Our Purpose also provides our colleagues with
the clarity needed to respond quickly and with agility as
part of Spirax Group.
Board Composition
In August we announced that Nicholas (Nick) Anderson
would be standing down as Group Chief Executive after ten
years in the position. Nick has led the Group with distinction
and meaningfully improved on the Group’s long record
of consistent and quality growth. More than half of this
growth was organic, with the balance coming from
successful acquisitions that strengthened and enhanced the
Steam Thermal Solutions and Watson-Marlow Fluid Technology
Solutions Businesses, as well as establishing our Electric
Thermal Solutions Business. Nick also leaves our Group with
firmly embedded sustainability strategies, inclusion and
equity programmes, as well as successful leadership and
talent development programmes that contributed to the
selection of a strong internal successor.
In August, we were delighted to announce Nimesh Patel’s
appointment as Group Chief Executive Officer and he took
up the position on 16th January 2024. Nimesh joined the
Group in 2020 as Chief Financial Officer and his appointment
as Group Chief Executive Officer follows a rigorous succession
process, more details of which can be found in the Nomination
Committee Report on pages 134 and 135. As announced in
December 2023, Louisa Burdett will join the Group in July
2024 as the Chief Financial Officer. Louisa is a highly
experienced CFO having led finance functions in several
large companies including UK-listed Croda, Meggitt and
Victrex. She currently serves as a Non-Executive Director
and Audit Committee Chair of RS Group plc. The recruitment
of Louisa as successor in the role of CFO followed our usual
rigorous succession process. Director of Group Finance, Phil
Scott, will act as Interim Chief Financial Officer until that
point, although will not be a statutory director of the Company.
Spirax Group Annual Report 2023
107
Governance Report Board leadership and Company Purpose continued
Chair’s introduction continued
Embedding Environmental, Social and Governance
(ESG) oversight
The Board is directly responsible for ESG matters and is
responsible for the overall stewardship of strategic risk
management and internal control. The Board as a whole
continues to have direct and comprehensive oversight of
ESG matters, which are essential to the execution of our
Group and Business Strategies. The Board received six
updates from Sarah Peers, Group Director of Sustainability,
during 2023. This included updates on progress against
metrics and targets and enabled the Board to be directly
involved in ESG matters. More information on the Group’s
approach to Sustainability can be found in the Sustainability
Report on pages 60 to 97.
The Audit Committee is also directly involved in the detailed
review of risks, which includes climate-related risks, and it
reports back to the Board on its findings. The Risk Management
Committee has responsibility for managing climate-related
risks. Sarah Peers has specific delegated responsibility for
overseeing climate-related risks and mitigation activities, as
well as for ensuring that climate-related risks and opportunities
are appropriately considered in management’s day-to-day
operational practices. This is carried out through the Group
Sustainability Management Committee (GSMC). The GSMC
comprises the Group Director of Sustainability, Heads of
Sustainability from each respective Business, Strategic
Initiative and Strategic Project leads and other key
individuals as required.
Sustainability and Health and Safety updates are always the
first two operational matters addressed by the GEC and
Board at each meeting.
We have a quarterly Steering Committee meeting, attended
by the Executive Sponsors of One Planet Sustainability
Strategy, the strategic initiative/strategic project leads and
the Group Sustainability Reporting Manager. These
meetings consist of updates on current strategic initiatives
and projects, and other general One Planet Sustainability
Strategy updates and decisions.
During 2023, there were three meetings of the Colleague
Engagement Committee (CEC). The CEC’s principal remit is
to ensure that the voice of the workforce is considered in all
aspects of the Board’s thinking and to understand and
support colleague engagement activities across the Group.
The CEC also has a clear programme and agenda for meeting
self-selected groups across the business, without management
present, in order to understand better their roles and gain
their feedback and their experience working for the
Company. Full information of the CEC’s activities in this
regard can be found in the CEC Report on pages 128 to 131.
Board Performance
The Chair confirms that, following a formal performance
evaluation, each Director’s performance continues to be
effective and each Director demonstrates commitment to
the role. The Senior Independent Director conducted a
review of the performance of the Chair as required by the
Code and the review concluded that the Chair’s performance
was good. More information on the Board Effectiveness
review for 2023 can be found in the Nomination Committee
Report on pages 132 to 137.
Section 172 Statement
The long-term success of our business is dependent on
the way we work with all our stakeholders and continues
to require effective engagement, constructive working
practices and recognition of stakeholder views in order to
create and sustain value for all.
In accordance with the Companies (Miscellaneous
Reporting) Regulations 2018, the Directors have prepared
a statement describing how they have had regard to the
matters set out in Section 172 when performing their duty to
promote the success of the Company. This can be found on
pages 121 to 123.
Outcome of 2023
The Board and Management were vigilant in staying
informed of current events impacting the business. We
continue to deal with uncertainty in the Pharmaceutical &
Biotechnology and Semiconductor sectors, due to customer
destocking. Against this backdrop, the Group’s financial
performance in 2023 was in line with the expectations we
set out in our November 2023 trading update. More
information on the 2023 Group performance can be found in
the Strategic Report on pages 4 to 105.
Fair, balanced and understandable
In accordance with the Code, the Directors confirm that
they consider the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
Group’s financial position, performance, business model and
strategy.
Statement by the Directors on compliance with the Code
The UK Corporate Governance Code 2018 applied to the
Group for the financial year ended 31st December 2023, a
copy of which can be found on the FRC website, www.frc.org.
uk.
With effect from 1st January 2023 the Board considers that it
has complied, in full, with the principles and provisions of the
Code, following the final step change bringing the previous
Group Chief Executive’s pension contributions in line with
the wider UK colleague maximum contributions of 10%. The
current Group CEO’s pension contributions were already at
10% when he joined as Chief Financial Officer. We detail our
compliance, on a Code provision-by-provision basis, in the
Corporate Governance section on our website, spiraxgroup.
com/governance-documents.
108
Spirax Group Annual Report 2023
Governance Report Board focus for 2024
• Continue to support the Group Executive Committee
and the three Businesses with their growth plans
through the implementation of their medium term plans
• Key management presentations and discussions are
planned in 2024 across all of our Businesses
• Consolidate our position through both organic and
inorganic growth
• Focus on ESG and climate change
• Board Chair succession planning
Further reading
The Notice of Annual General Meeting and all governance-related
policies and procedures are available to view and download:
spiraxgroup.com/agm-notices
Proxy advisory firms
The Company engages with a number of proxy advisory
firms ahead of publication of its Notice of AGM and
publication of their proxy reports in order to, where
possible, align proposed resolutions with investor
expectations.
Annual General Meeting
The Annual General Meeting (AGM) is scheduled to take
place on Wednesday, 15th May 2024 and an explanation of
the resolutions sought, is set out in the Circular posted on
our website and sent to shareholders in the format selected
by them. As required by the Code, the resolutions regarding
each Director’s appointment or reappointment will be
accompanied by information on why their contribution is,
and continues to be, important to the Company’s long-term
sustainable success.
In 2024, we will be proposing a number of resolutions in
addition to the regular business. The first of which is the
proposal to change the Company name from Spirax-Sarco
Engineering plc to Spirax Group plc. This is in support of
our decision to refresh the branding of the Group to help
stakeholders better understand our evolution to a larger
Group that now includes three strong and aligned
Businesses. The brand refresh is also an exercise in
simplification: we are often referred to as ‘Spirax’ and our
stock market ticker is ‘SPX’, therefore, in this way we are
moving more intentionally into a space we already occupy.
It is also an exercise in impact with ‘Spirax Group’ replacing
the longer Spirax-Sarco Engineering. One of the main aims
of the brand refresh and Company name change is to
eliminate the confusion that exists in differentiating the
Group from the Spirax Sarco Division of Steam Thermal
Solutions (previously Steam Specialties). The Group is often
mistaken for the Spirax Sarco Division and, therefore,
external stakeholders sometimes see us purely as a ‘steam
engineering company’. In supporting our change to Spirax
Group plc, shareholders are enabling full alignment to our
brand refresh, giving more visibility to all three Businesses
and removing the confusion with Spirax Sarco. This is
important in helping Spirax Group clearly communicate our
full capabilities, including our ability to support our
customers to achieve their operating, sustainability and
decarbonisation goals.
Also, and in line with our commitment to our shareholders,
retail and investment, we are proposing a minor
administrative amendment to our Articles of Association in
order to better identify and manage ‘lost’ shareholders in
order to reunite or reclaim assets.
This year we are delighted to invite you to the AGM at our
refurbished Group Headquarters at Charlton House, in
Cheltenham, UK, see page 76 for details on the work done
to transform the building into a modern and sustainable
working space that will serve the Group for decades to
come.
I look forward to meeting shareholders at the AGM on
Wednesday, 15th May 2024.
Jamie Pike
Chair
6th March 2024
Spirax Group Annual Report 2023
109
Governance Report Board leadership and Company Purpose continued
Governance at a glance
At year end 2023
Highlights from 2023
Understanding our business
Chromalox
(ETS)
Saltlake City,
USA
Thermocoax (ETS)
Athis-Val de Rouvre,
France
Vulcanic (ETS)
and WMFTS
Barcelona,
Spain
WMFTS
Devens
Boston,
USA
Flexicon
(WMFTS)
Stockholm,
Sweden
Spirax Sarco (STS)
and Chromalox (ETS)
Shanghai, China
WFMTS
Taiwan, China
Board
GEC members
Spirax Sarco
(STS)
Sao Paulo,
Brazil
The Board and GEC regularly visit our sites all over the world, connecting with colleagues and the Businesses
first hand in order to better understand the operating environment and challenges they face.
Listening to colleagues
90%
Colleague engagement
with ‘pulse survey’
10
The Colleague Engagement Committee
held 10 in person forums directly with
colleagues
100+
Colleague voices were
heard during the sessions
See further information in the Colleague Engagement Committee Report on pages 128 to 131
110
Spirax Group Annual Report 2023
Governance Report Major board decisions
March
• Approval of the final dividend of
June
• Approval of the
114.0 pence per share
• Authorisation of further investment
of £47m (US$ 58.2m) for the expansion
of the Chromalox Ogden plant
investment in Kyoto
Heatcube (see page
122)
December
• Review and Approval of the
2024 Group Plan
• Initiation of the Group
Strategic Framework
February
• 2023 strategic and
financial plan approved
May
• Adoption of Audit related
policies
• Agreement of Group
Branding refresh
• Authorisation of 2023
ESOP invitation
August
• Approval of 2023 Interim Results announcement
• Approval of the interim dividend of 46.0
pence per share
• Appointment of new Non-Executive Director,
Constance Baroudel
• Announcement of the successor to the role
of Group Chief Executive
Board tenure
40%
1–3 years
3–5 years
5 years +
30%
Average length
of service
5 years 4 months
30%
UK Corporate Governance Code
compliance
100%
We have complied in full with the principles and
provisions of the UK Corporate Governance Code
2018.
How the Board spent its time
30%
Operations & Risk
30%
Strategy
10%
Sustainability
10%
Finance
10%
Governance
10%
People
Spirax Group Annual Report 2023
111
Governance Report Board leadership and Company Purpose continued
Board of Directors
N
RK
RK
Jamie Pike MBA, MA, MIMechE
Chair
Nimesh Patel BSc
Group Chief Executive Officer
Appointed to the Board
May 2014, Chair from 2018.
Areas of experience
Engineering, international business,
senior management, M&A, strategy.
Background
Jamie Pike joined Burmah Castrol in 1991
and was Chief Executive of Burmah Castrol
Chemicals before leading the Foseco buyout
in 2001 and its subsequent flotation in 2005.
Prior to joining Burmah, he was a partner at
Bain & Company. Jamie was educated at
Oxford, holds an MBA from INSEAD and is a
Member of the Institute of Mechanical Engineers.
External appointments
Chair and Non-Executive Director of
XP Power Limited.
Chair of IMI plc with effect from 1st January
2025.
Appointed to the Board
September 2020, Group Chief Executive
Officer from January 2024 (having previously
served as Chief Financial Officer).
Areas of experience
International business, senior management,
M&A, finance and accounting, industrial,
pensions, tax and treasury.
Background
Before joining the Group in 2020, Nimesh Patel
was Chief Financial Officer of the De Beers
Group. Prior to that he was Group Head of
Corporate Finance at Anglo American plc,
leading a team based in London and
Johannesburg. Previously, Nimesh spent 14
years in investment banking at both JP Morgan
and as a Managing Director at UBS.
External appointments
Co-Chair of the FTSE Women Leaders Review
and Trustee of Barts Charity.
Phil Scott BA, ACMA, FCT
Interim Chief Financial Officer
Attends Board meetings
January 2024.
Not appointed as a statutory director.
Areas of experience
International business, senior management,
M&A, finance and accounting, pensions, tax
and treasury.
Background
Before joining the Group in 2021 as Director of
Group Finance, Phil led a number of the Group
Finance functions at Ferguson plc. Prior to that
Phil spent 15 years at Vodafone Group plc.
Phil is a member of the Chartered Institute
of Management Accountants and Fellow of
the Association of Corporate Treasurers.
External appointments
Director of Wolseley Pension Trustees Limited
which provides trustee services to the
Wolseley Group defined benefit pension
scheme.
N
C
R
N
C
A
N
Angela Archon MSc SE, BSc CEng
Independent Non-Executive Director
Constance Baroudel Msc, BA
Independent Non-Executive Director
Peter France
Independent Non-Executive Director
Appointed to the Board
December 2020.
Areas of experience
Engineering, operational, strategy,
international, M&A, manufacturing,
senior management.
Background
Angela Archon held various senior executive,
global positions in Business Development,
Engineering, Operations, and Strategy,
throughout her 30-year career at IBM
Corporation. She also represented IBM for
eight years as Board Liaison for the National
Action Council for Minorities in Engineering.
Angela is a member of the Engineering Honour
Society and earned a Professional Engineer’s
license. Until December 2022, she was a
non-executive director of Switch Inc., listed on
the New York Stock Exchange.
External appointments
Non-Executive Director of DT Midstream Inc.,
Trustee at CommonSpirit Health.
112
Spirax Group Annual Report 2023
Appointed to the Board
August 2023.
Appointed to the Board
March 2018.
Areas of experience
Strategy, sustainability, operational, international
business, R&D, international relations.
Background
Constance is Sector Chief Executive,
Environmental & Analysis and Chief
Sustainability Officer at Halma plc, having
previously held a range of executive positions
within Halma plc, as well as with First Group
plc, De La Rue and Strategic Decisions Group
International. With more than 20 years’
experience, Constance has significant
knowledge of working in large, global
organisations. Constance previously served as
Non-Executive Director for both Kier Group
and Synergy Health plc.
External appointments
Sector Chief Executive, Environmental &
Analysis and Chief Sustainability Officer at
Halma plc.
Areas of experience
Engineering, international, senior
management, M&A, operational, strategy,
sales and marketing, industrial, manufacturing.
Background
Peter France was Chief Executive Officer of
Rotork plc from 2008 to 2017. He also gained
wide experience in a number of key roles at
Rotork plc from 1989 to 2008 including acting
as Chief Operating Officer and Director of
Rotork South East Asia based in Singapore.
Peter is a Chartered Director of the Institute of
Directors.
External appointments
Chief Executive Officer of TT Electronics.
Governance Report A
N
R
A
N
C
N
C
R
Richard Gillingwater MA
Independent Non-Executive Director
and Senior Independent Director
Appointed to the Board
March 2021.
Areas of experience
International business, investment, finance
and non-executive experience.
Background
Until December 2022, Richard Gillingwater
was Chair of Janus Henderson Group plc. He
has also held a range of executive positions
within global investment banks including
Kleinwort Benson, Credit Suisse and Barclays
de Zoete Wedd. Richard holds an MBA from
the International Institute for Management
Development, a BA Law from Oxford University
and is qualified as a solicitor.
External appointments
Senior Independent Director of Whitbread plc
and Governor of the Wellcome Trust.
Caroline Johnstone BA, CA
Independent Non-Executive Director
Jane Kingston BA
Independent Non-Executive Director
Appointed to the Board
March 2019.
Areas of experience
International, M&A, finance, people.
Background
Caroline Johnstone has 40 years’ experience
working with large global organisations on
mergers and acquisitions, culture change and
cost optimisation. She was a partner in
PricewaterhouseCoopers (PwC) and sat on the
UK Assurance Board as people partner.
Caroline is a member of the Institute of
Chartered Accountants of Scotland.
External appointments
Chair of Synthomer plc, Non-Executive
Director, Senior Independent Director and
Audit Committee Chair of Shepherd Group Ltd,
a private company which owns Portakabin
Limited and sits on the Governing Board of the
University of Manchester.
Appointed to the Board
September 2016.
Areas of experience
Engineering, international business, senior
management, operational, people,
remuneration.
Background
From 2006 until her retirement in December
2015, Jane Kingston served as Group Human
Resources Director for Compass Group PLC.
Prior to this, she served as Group Human
Resources Director for BPB plc. Jane has
worked in a variety of sectors, including roles
with Blue Circle Industries plc, Enodis plc and
Coats Viyella plc and has significant
international experience.
External appointments
Non-Executive Director and Remuneration
Committee Chair of Inchcape plc (until 9th
May 2024).
A
N
R
Kevin Thompson BSc, FCA
Independent Non-Executive Director
Appointed to the Board
May 2019.
Areas of experience
Engineering, international, senior
management, M&A, strategy, finance,
pensions, tax and treasury.
Background
Kevin Thompson was Group Finance Director
of Halma plc from 1998 to 2018, having joined
Halma as Group Financial Controller in 1987.
Kevin qualified as a Chartered Accountant with
PricewaterhouseCoopers (PwC) and is a
Fellow of the Institute of Chartered
Accountants in England and Wales.
External appointments
Deputy Chair and Trustee of the Great Ormond
Street Hospital Children’s Charity.
Andy Robson LLB Law Barrister
Group General Counsel and
Company Secretary
Appointed as Group General Counsel
and Company Secretary
June 2012.
Areas of experience
International law, corporate governance,
international business development including
M&A, business restructuring, information
technology, contract negotiation.
Background
Before joining the Group in 2012, Andy Robson
was General Counsel and Company Secretary
of RM plc, a role he held for 14 years. Prior to
this, Andy was European General Counsel with
Cendant Corporation headquartered in
Baltimore, USA and worked in the USA for
Blackstone Trust. He was also Deputy General
Counsel at BAE Systems plc.
Key
A
N
C
Audit Committee
Nomination Committee
Colleague Engagement
Committee
R
Remuneration Committee
RK
Risk Management Committee
Denotes Committee Chair
Executive
Non-Executive
Group Executive Committee
Company Secretary
Further reading
Read about our Board diversity,
composition, succession and evaluation.
See pages 126 to 127
Spirax Group Annual Report 2023
113
Governance Report Board leadership and Company Purpose continued
Our Group Executive Committee
Nimesh Patel BSc
Group Chief Executive Officer
See Biography on Board of
Directors on pages 112 to 113
Phil Scott BA, ACMA, FCT
Interim Chief Financial Officer
See Biography on Board of
Directors on pages 112 to 113
Andy Robson LLB Law Barrister
Group General Counsel and
Company Secretary
See Biography on Board of
Directors on pages 112 to 113
Maurizio Preziosa
Managing Director,
Steam Thermal Solutions
Appointed to the Group
Executive Committee
January 2021.
Background
Maurizio joined Spirax Group in 2011 as
Managing Director of Spirax Sarco Italy and
developed his career in the Group by assuming
the role of Regional General Manager Southern
Europe, Global Divisional Director Gestra, up to
the appointment at Group Managing Director
Steam Thermal Solutions in 2021. Prior to
joining Spirax Group Maurizio worked in ABB
Group with different sales management and
general management roles.
Armando R. Pazos
President,
Electric Thermal Solutions
Appointed to the Group
Executive Committee
December 2021.
Andrew Mines
Managing Director, Watson-Marlow
Fluid Technology Solutions
Appointed to the Group
Executive Committee
November 2019.
Background
Armando joined the Group in March 2020 as
the Vice President of Global Sales and joined
the GEC in December 2021 following his
promotion to President and Managing Director
of the Electric Thermal Solutions Business.
Prior to this, Armando was at Ingersoll Rand,
an industrial global manufacturer of tools,
pumps, and air compressors, for 24 years.
Background
Prior to joining the Group, Andrew held the
position of Executive Vice President, Global
Construction Products of Illinois Tool Works
Inc. (ITW) and was a member of the Group
Executive Leadership Team. Andrew had a
23-year career with ITW comprising engineering,
sales, manufacturing and senior roles in global
Automotive and Construction sectors.
Sarah Peers
Group Director of Sustainability
Appointed to the Group Executive
Committee
October 2022.
Background
Sarah joined the Group in 2013 as Group Head
of Corporate Communications and was appointed
Group Head of Sustainability in July 2020 and
is now Group Director of Sustainability. Prior to
joining the Group, Sarah worked as a qualified
teacher. Sarah holds a Doctorate in Historical
Geography (specialising in early industrial
labour history) from the University of Oxford.
114
Spirax Group Annual Report 2023
Jim Devine
Group HR Director
Maria Wilson
Group Digital Director
Appointed to the Group Executive
Committee
February 2016.
Appointed to the Group Executive
Committee
September 2023.
Background
Before joining the Group in 2016, Jim was
Group HR Director at Chemring plc and prior to
that held a range of senior HR roles at Centrica
plc, Ford Motor Company and BAE systems.
Background
Prior to joining Spirax in early 2023, Maria was
the Global Leader for Data Driven Advantage
with Howden, leading the vision definition and
execution of a global digital program focused
on delivering business growth enabled by
digital technologies. She has also completed a
PhD in Fluid Mechanics from the University of
Erlangen-Nuremberg, Germany.
Governance Report The Board at a glance
At year end 2023
Expertise and experience
Core expertise
Length of service
Board tenure
International business
Pensions
Senior management
Tax & treasury
M&A
Sales & marketing
Engineering
Manufacturing
Strategy
Sustainability
Operational
Investment
J. Pike
N.J Anderson
N.B. Patel
A. Archon
C. Baroudel
P. France
R. Gillingwater
C.A. Johnstone
J.S. Kingston
K.J. Thompson
0
2
4
6
Years
8
10
12
Finance & accounting
Industrial
People
Non-Executive
experience
R&D
Remuneration
Executive Director
Group Chief Executive
Non-Executive Director
Chair
Average length of service
5 years 4 months
Board and Committee attendance
Board
Audit
Remuneration
Nomination
Colleague
Engagement
Risk
Management1
Jamie Pike
Nicholas Anderson
Nimesh Patel
Angela Archon
Constance Baroudel
Peter France
Richard Gillingwater
Caroline Johnstone
Jane Kingston
Kevin Thompson
7/7
7/7
7/7
7/7
3/3
7/7
7/7
7/7
7/7
7/7
5/5
5/5
5/5
5/5
5/5
5/5
5/5
5/5
4/4
4/5
3/3
5/5
5/5
4/5
5/5
5/5
4/4
3/4
3/3
3/3
3/3
3/3
1 The Risk Management Committee consists of the Executive Directors, members of the Group Executive Committee (GEC) and other key
individuals, full details can be found on page 150
Board changes
• Olivia Qiu stepped down as an Independent
Non-Executive Director on 31st January 2023
• Constance Baroudel joined as an Independent
Non-Executive Director on 2nd August 2023
• Nicholas Anderson retired as Group Chief Executive
on 16th January 2024
• Nimesh Patel was appointed as Group Chief Executive
Officer on 16th January 2024
Board makeup
Ethnicity
Gender Diversity
Nationality
10%
10%
40%
10%
10%
10%
80%
60%
70%
Black
Indian
White
Female
Male
British
British/American
British/Irish
French
Spirax Group Annual Report 2023
115
Governance Report Our shareholders
Engineering our future,
together
Consistent controls for a more resilient future
Today, companies like ours are operating in
increasingly complex environments and the
regulatory landscape for governance is
changing, with significant legislation changes
under debate by governments around the world.
Good governance is good for business and by
implementing consistent and robust financial
controls across the Group, we’re setting
ourselves up for a more resilient future.
Launching our Group Governance Guidelines
(G3) programme just over 18 months ago was a
significant step on this journey. The aims of G3
are to strengthen our financial resilience through
working collaboratively and in partnership to
build a stronger Spirax Group that is focused on
achieving excellence in line with our Values.
G3 is a risk-based approach to improving
financial controls. By supporting teams across
our Group to adopt the right approach to
processes and controls for each individual
operating company, we help protect against
risks such as fraud, financial misstatement and
other forms of financial misconduct, as well as
ensuring compliance with our own internal
policy requirements.
To ensure a consistent approach, the Group
Internal Controls team is developing the policies
and expected controls centrally, it then partners
with our Businesses to implement and embed
the G3 programme locally. The G3 programme
is supported by a library of training materials
and a global online platform to track and monitor
progress and milestones across the Group.
A strong control and governance framework is
critical because it safeguards the integrity of our
reporting, supports the prevention of fraud and
enables our Businesses to operate more
effectively through having enhanced data
and a better understanding of the drivers of
our success.
5,000+
controls across our Group since 2022
116
Spirax Group Annual Report 2023
Our finance teams have been
implementing and assessing
controls in line with our G3
financial control timetable and
as a result we have now
assessed over 5,000 controls
across our Group!”
Kristy Wright
Regional Internal Controls Champion,
Spirax Group
The Group Internal Controls
team is intentionally spread
geographically across the Group,
to be closer to our operating
companies, from Asia Pacific to
the Americas, and supporting all
the Businesses. The team is
readily on hand to guide the
implementation, and partner
with the local Finance teams,
supporting implementation
needs, monitoring for ongoing
compliance and championing
wider opportunities to improve
the effectiveness and efficiency
of our control environment.”
Chris Fitzsimmons
Group Head of Internal Controls,
Spirax Group
Governance Report Implementing effective controls is important
for reducing financial and fraud risks as well
as ensuring compliance, but it also improves
our operational efficiency through the
adoption of more standardised and streamlined
processes, freeing up our finance teams to
work on other value-add tasks.”
Kristen Jensen
Financial Controller,
Durex Industries, part of Electric Thermal Solutions
Spirax Group Annual Report 2023
117
Governance Report Board leadership and Company Purpose continued
Board activities
Board and Committee meetings during the year
Ordinarily the Board meets seven times a year and then on
an ad hoc basis as required. In the year ending 31st
December 2023, there were seven scheduled meetings of
the Board. Attendance at scheduled Board and Committee
meetings is set out in the table on page 115. Other senior
Executives and Non-Executive Directors (where they are
not formal Committee members) attended by invitation.
All Directors are expected to attend all Board meetings and
relevant Committee meetings unless prevented by prior
commitments, illness or a conflict of interest. Directors
unable to attend specific Board or Committee meetings are
sent the relevant papers and asked to provide comments in
advance of the meeting to the Chair of the Board or Committee.
In addition, all Board and Committee members receive the
minutes of meetings as a matter of course.
Board activities
The Board is collectively responsible for the long-term
success of the Company, its strategy, governance and
internal controls and is accountable for its activities. The
Board ensures good governance practices are embedded
throughout the Group as they are an integral part of running
a successful business. This specifically includes a focus on
Environmental Social and Governance (ESG) matters as
there is not a separate Board Committee for this.
To support this, the Board considers reports on the key
activities of the Group and reports from the Chairs of the
Audit, Nomination, Remuneration and Colleague Engagement
Committees as appropriate at each scheduled Board meeting.
It also receives information on important forthcoming events,
reports on environmental, sustainability and health and
safety matters, on strategy, investor relations and legal affairs.
The Chair, with assistance from the Group General Counsel
and Company Secretary, is responsible for the governance
arrangements. This includes meeting agendas, timely
information flows and facilitating dialogue between Executive
and Non-Executive Directors, to encourage an open and
supportive culture.
Board agendas are carefully planned to ensure focus on the
Group’s strategic priorities and key monitoring activities, as
well as reviews of significant issues.
The General Counsel and Company Secretary is responsible
for maintaining forward agendas for the Board and its
Committees, ensuring that items are evenly distributed and
scheduled at the appropriate times of the year for timely
consideration. Agenda timings are proactively managed to
enable sufficient time for consideration of items.
The Board regularly receives papers and presentations from
senior management, giving the Board the opportunity to
meet colleagues below GEC level. This helps to embed a
positive attitude to good governance in the Company’s
culture and ensures that processes and procedures are
adhered to by demonstrating the Board’s desire to ensure
they have robust information on which to make sound
decisions and carry out their statutory duties.
As per best practice, our Non-Executive Directors meet with
Deloitte (external auditor) and Korn Ferry (independent
remuneration consultants) separately from our Executive
Directors after every Board or Committee meeting they
attend. The Board confirms that neither it, nor any of its
Directors, have any connection with Korn Ferry or Deloitte.
The Colleague Engagement Committee meets with groups
of colleagues separately from management. More information
about these meetings can be found on pages 128 to 131.
Annually the Board combines a scheduled Board meeting
with further meetings focusing on strategic development
and to review the Group’s longer term outlook. At this
meeting members of the Group Executive Committee
present strategy papers for their business areas including
financial, technology, organic and inorganic growth and
stakeholder engagement. On ESG matters, the Group
Director of Sustainability presents updates on progress
with the implementation of the One Planet Sustainability
Strategy at every Board meeting and the Group Head of
Health and Safety attends Board meetings periodically. In
addition, the Board has been actively involved in the setting
of goals and targets relating to ESG matters and their
translation into performance-related metrics.
The Group’s Whistle-blowing Policy and independently
facilitated whistle-blowing platform enable colleagues to
report any concerns related to unethical or illegal conduct
within the business, anonymously if preferred. The Board
receives reports from the Group General Counsel if any
concerns have been raised via the Policy.
Culture and Values
To achieve our Purpose, we rely on our widely understood
and established business model and most importantly, a
strong and supportive culture. Our culture comes from
colleagues living our Values (see page 8) which guide their
decision making and the ways in which they make their
difference for our Group and our stakeholders.
Our Values also guide Board decision-making. We prioritise
Safety and, through our engagement with each other and
our Group colleagues, we help improve Collaboration and
Respect. We support Excellence and Customer Focus
through an ongoing programme of investment, our
decision-making is supported by site visits and
management presentations. We promote and support
Integrity through our transparent approach, as well as
ensuring the Group has appropriate processes and controls
which underpin strong corporate governance.
The Board was pleased to approve and oversee the
implementation of the Group’s Inclusion Plan in 2022, noting
the impact it is already having across the Group. To further
strengthen our focus on inclusion and equity leading to
greater diversity in our Group, we approved a set of
refreshed Diversity goals at our December 2023 meeting,
which can be found on page 68.
More information on specific Colleague Engagement,
including topics raised by Colleagues and how we have
responded can be found in the Colleague Engagement
Committee Report on pages 128 to 131.
118
Spirax Group Annual Report 2023
Governance Report Key Board activities
Strategy
• Group Strategy Framework.
• Reviewed and assessed medium- term plans for all
three Businesses
• Reviewed Corporate Strategy
• Reviewed One Planet Sustainability Strategy
• Two-day Strategy presentations
• Group China Strategy
Audit and risk
• Annual Risk Review
• Reviewed external financing facilities
• Mandatory Contract Practices
• Deep-dive on Principal Risks ‘Loss of Critical Supplier’,
Loss of Manufacturing Output and Breach of Legal
and Regulatory Requirements
Performance
• Monthly, quarterly, biannual and annual trading,
as appropriate*
• Company share performance and shareholder/
analyst feedback*
• Business reviews and senior management presentations
• Thermocoax (France) and WMFTS (Massachusetts)
performance and management review by Board during
visits to operations
Culture and People
• Rising Talent presentations
• Group Talent update
• Colleague focus groups facilitated by Colleague
Engagement Committee, which includes a number
of NEDs
• Reviewed and approved the 2023 Diversity and
inclusion goals including setting a new ethnicity goal
• Board Visits to Thermocoax (France) and WMFTS
(Massachusetts)
ESG and Health and Safety
• Health and safety and sustainability strategy updates*
• Setting goals and targets for forthcoming year
• Reviewed and supervised the full year results for
sustainability KPIs and progress against targets
• Received a sustainability recruitment update
• Received an update and reviewed the Group’s TCFD
disclosures
• Approved introduction of new Electric Company
Vehicle Scheme
• Thermocoax (France), WMFTS (Massachusetts) and
Spirax Sarco Supply (UK) review during Board visits
Governance
• Received updates by Committee Chairs*
• Received updates on all material legal and
Governance matters*
• Compliance programmes update*
• Reviewed Bid Defence process
• Refreshed Sanctions Policy
• Reviewed Whistle-blowing cases
• Full organisational and succession review across all
* Standing items at every scheduled Board meeting
senior management (to GEC-3)
The Board monitors and assesses culture using the following mechanisms:
Approach
How it links to culture
Colleague Engagement
Committee
Colleague survey
Committee Focus
Groups
Internal Audit reports
Inclusion and Diversity
Other
Insight (in form of business and HR leads presenting) from different business areas to
understand what is happening locally as drivers to improve engagement and colleague
experience. This enables discussion and visibility of how our Values are being lived through
organisation and how aligned local culture is to the current and future strategic objectives.
Gives global insight into colleague engagement and enablement that informs where focus/
action needs to be placed to support the organisation’s culture and the Group’s strategic goals.
Monthly touchpoints with groups of colleagues from different business areas globally to
listen to the colleague voice, open dialogue and gain feedback on what it’s like to work at the
Group and build assurance that the desired culture is being embedded within the
organisation. This involves presenting key themes to the management teams to support any
local/Group activity that is required. During each of the operational visits detailed in Board
activities (Thermocoax (France), WMFTS (Massachusetts) and Spirax Sarco Supply (UK)) a
Colleague Focus Group took place with feedback presented to management and the CEC.
Information from the internal audit team on the impact of policies and processes.
Review and supervision of Diversity goals on gender and ethnicity.
Whistle-blowing cases, grievance as well as ‘speak-up’ data, health and safety data
(including near misses), promptness of payments to suppliers, approach to regulators.
Spirax Group Annual Report 2023
119
Governance Report Board leadership and Company Purpose continued
Leading with purpose
Supporting framework
Good governance adds value. It is well-ordered, transparent
and ethical, and is focused on tackling operational
challenges in ways that complement the Group Strategic
Priorities. Good governance enables us to build a better and
more sustainable future for all.
Our Whistle-Blowing Policy and secure whistle-blowing
facility, enable colleagues to make reports if they suspect or
experience any misconduct or wrongdoing in our business.
The facility, hosted by Safecall, an independent provider,
enables colleagues to report concerns via a web portal or
by telephone, anonymously if preferred.
We have a number of Group policies which are designed to
help our colleagues balance their work and personal lives
effectively, including flexible working.
Further reading
Our Anti-Bribery and Corruption Policy and Modern Slavery
Statement can be found on our website,
spiraxgroup.com/governance-documents
It’s the duty of Board members to remain focused on broad,
strategic goals while tackling day-to-day issues and
meeting their responsibilities, so it is incumbent on them to
work with certain governance ideals in mind.
In order to do this the Board has developed and approved
various policies to enable and empower our colleagues to
achieve our goals. We have a comprehensive Code of
Conduct and supporting policies, including Whistle-blowing,
Anti-Bribery and Corruption, and Human Rights Policies,
which set standards for ensuring that our business activities
are conducted in a responsible manner for the benefit of our
shareholders, customers, colleagues and suppliers. Spirax
Group has zero tolerance to any form of bribery and
corruption, both within our Group and in any dealings with
our customers, suppliers and other third parties.
All colleagues and Board members are expected to
demonstrate and promote high standards of ethical
business conduct and to know and follow our Code of
Conduct with pride.
120
Spirax Group Annual Report 2023
Governance Report Section 172 Statement
The long-term success of our Group is
dependent on the way we work with all our
stakeholders and continues to require
recognition of all stakeholder views,
constructive working practices and, when
appropriate, effective engagement in order to
create and sustain value for all.
This section, from pages 121 to 123, forms our Section 172
statement. It describes how the Directors have performed
their duty, in good faith, to promote the success of the
Company, for the benefit of our shareholders, including how
they have considered and engaged with wider stakeholders,
and how they have taken account of the matters set out in
Section 172(1)(a) to (f) of the Companies Act 2006.
Considering these broad interests is an important part of
the way the Board makes decisions and, at times, the Board
has to balance the competing interests of different
stakeholders and other factors in delivering the Company’s
Strategy. The Board has delegated responsibility for the day
to day running of the Businesses to the GEC and, as a result,
many of the decisions and activities undertaken have
approval from the Board by virtue of these delegated
responsibilities. An overview of the guiding principles for
these delegated responsibilities is set out on page 123. The
Board receives regular updates on key initiatives undertaken
by the Group that affect stakeholders so that they can
understand and challenge, where necessary, decisions
made by management.
Some examples of key Section 172 decisions that the Board
has taken in 2023, and how it has taken into account the
views and needs of wider stakeholders in making those
decisions, are described in the following pages.
Board decision: Expansion to Chromalox’s Ogden Manufacturing plant
ETS, to help customers to reach carbon footprint
reduction goals without sacrificing performance or
reliability.
Odgen in Utah (USA) has been Chromalox’s centre of
excellence for industrial heaters and systems since 1976.
In 2010, Ogden developed the technology and became
the global centre of expertise for our patented Medium
Voltage heating solutions, which are now the leading
driver of sales growth for ETS supporting
decarbonisation of industrial processes.
Customers: demonstrates our commitment to
investment and innovation; improves supply continuity;
reduces lead times and improves service levels; and
supports our customers in their decarbonisation efforts.
Colleagues: leads commitment to health, safety, and
wellbeing; creates career opportunities; and builds strong
colleague engagement, regionally and globally.
Community and environment: creates employment
opportunities for the local community; increases
engagement with local authorities and community
groups; helps our transition towards net zero greenhouse
gas emissions with a sustainable building and site and
showcases our commitment to sustainability by
delivering biodiversity net gain of +10% on the project.
Shareholders: supports growth as we accelerate our
capacity expansion to meet demand; improves business
continuity on critical high growth products; reinforces
Spirax Group’s sustainability objectives through design,
construction, and operation.
Link to strategy: in addition to unlocking future growth
from the high demand we see for decarbonisation
solutions, this project will utilise the latest technology
equipment which better serves our customers.
Spirax Group Annual Report 2023
121
In March 2023 the Board approved a US$58.2m (£47.0m)
investment in the expansion of the Chromalox Ogden
(Utah, USA) facility, increasing its footprint by over 50%.
This will deliver a state-of-the-art manufacturing unit by
the end of 2024, dedicated to Medium Voltage (MV)
electric heating systems. Since Chromalox became a part
of Spirax Group in 2017, we have been investing in plant
processes, aimed at improving throughout, as well as
improving colleague working environments through the
installation of a zero-emission air conditioning solution,
which is also in line with our sustainability commitments.
The investment in the new facility will accelerate our
ability meet the high levels of demand for bespoke
solutions that deliver decarbonisation benefits, as well as
make a major contribution to employment in the local
vicinity.
Chromalox’s mission is to provide highly efficient,
modular, and scalable electric heating solutions for
the decarbonisation of process heating, hot water and
steam generation systems. Chromalox’s reputation in
electric heating combined with its focus and commitment
to sustainability, means it is well positioned, as part of
Governance Report Board leadership and Company Purpose continued
Section 172 Statement continued
Board decision: Investment in Kyoto Heatcube
In June 2023, the Board approved a partnership agreement with the Kyoto Group
to acquire a 15% ownership position through an investment of £3.0m, positioning
the Group in a significant growth market. Supporting the decarbonisation of
critical industrial processes is central to our Group’s Purpose to engineer a more
efficient, safer and sustainable world. We have been actively investing in new-to-
world decarbonisation solutions through product development since 2020. As
we already provide some of the technology that sits behind Heatcube through
Vulcanic in ETS, getting actively involved in supporting Kyoto through direct
investment and partnering is a natural extension of our activity in this area.
Kyoto, publicly held on the Oslo stock exchange (KYOTO.OL), is a start-up
company founded in 2016 on the same principles as the Spirax Group: to
maximise efficient and productive use of industrial process heating. Spirax Group
is focused on the application of thermal energy, steam and electric heating,
directly in our customer processes. Kyoto focuses on the storage and
management of energy as heat upstream of those processes.
Kyoto’s solution to the market’s need is the Heatcube technology, a modular
molten salt thermal energy storage system designed for both utilities and
industry. Heatcube enables the disassociation of energy production and energy
usage to provide a profitable mechanism for energy producers and users to
leverage increasing energy market fluctuations and excess power from wind and
solar. The Heatcube offers reliable and efficient storage of energy, and a
seamless delivery of heat to industrial customers, when it is needed. There are
several core components that are critical to Heatcube. The most critical is the
electric process heating system, which Vulcanic provides. Without our
technology, Kyoto’s Heatcube could not convert excess and low-cost electricity
from the grid into stored, usable thermal energy.
Customers: one of the focus areas of the Sustainable Energy Sector and our
own Sustainability and Energy Efficiency Customer Value Proposition (CVP) is
energy storage. This investment will provide guaranteed access to this thermal
energy storage market giving customers further options for heat storage whilst
introducing Kyoto customers to our products such as the Steam Battery (for the
storage of steam as thermal energy), which can complement the Heatcube.
Environment: the EU power market is rapidly evolving into solar surplus. Without
a synchronous expansion in storage and flexibility capacities, solar deployment
will stall, meaning that the reliance on fossil fuels will continue. The EU’s
ambitious renewable energy targets will require expansions in capacities capable
of harvesting and refining solar and wind energy surpluses.
2023 Shareholder Engagement
January
• Bank of America C-Suite SMID Cap
Conference 2023
• Investor site visit to Cheltenham
• Peel Hunt Industrials Dinner
March
• Full Year Results Announcement and
shareholder roadshow meetings
• Investor site visits to Cheltenham
May
• Trading Update
• Investor site visit to Cheltenham
June
• JP Morgan European Capital
Goods Conference
• Steam Thermal Solutions Investor
Seminar
August
• Half Year Results Announcement and
shareholder roadshow meetings
September
• Investor site visit to Cheltenham
• Morgan Stanley Industrial CEOs
• Unplugged 2023 Conference
• UBS Quo Vadis Industrials Tour
• Investor Roadshow – USA
October
• Investor site visit to Cheltenham
• Numis Private Clients Fireside chat
November
• Trading Update
• Baird Global Industrials Conference
• Investor Roadshow – Canada
• Numis Industrials CEO Dinner
• WHEB Annual Investor Conference
• Investor site visit and dinner
Shareholders: Heatcube systems, leveraging our technology, will produce
significant revenue and profit for Vulcanic within ETS.
December
• Bank of America CFO Fireside chat
Link to strategy: as part of our Engineering Premium Solutions (EPS) growth
strategy we are targeting an increase in our revenue in Energy Storage. This
investment will assist in achieving this target.
122
Spirax Group Annual Report 2023
Governance Report Guiding principles – Section 172(1)
a
b
c
the likely consequences
of any decision in the long-term
the interests of our colleagues
The Board always strives to act in the
long-term interests of its key
stakeholders to achieve our Purpose of
creating sustainable value for all of our
stakeholders by engineering a more
efficient, safer and sustainable world.
Through the Colleague Engagement
Committee (CEC), the Board receives
feedback from colleagues about
various topics, which the Board refers
to when making strategic and business
decisions.
More information can be found in our CEC
Report on pages 128 to 131
Our strategy is designed to help us do
better what we already do. The
individual Business strategies drive the
organic growth of the Group, whilst our
corporate strategy drives inorganic
revenue growth. Our One Planet
Sustainability Strategy, drives
our Environmental, social and
governance performance.
the need to foster business
relationships with suppliers,
customers and others
The Board understands the importance
of fostering business relationships with
our suppliers and customers. Both of
these stakeholders are considered in
all our decisions especially around
investing in our Group to serve
customers better and solve their
problems, as well as working with
suppliers as partners in those
solutions, and helping them develop as
part of a sustainable supply
ecosystem.
For more information see pages 80 and
96-97 in our Sustainability Report
d
e
f
the impact of Spirax Group’s
operations on the community
and the environment
the desirability of maintaining a
reputation for high standards of
business conduct
the need to act fairly as between
our shareholders
Through the One Planet
Sustainability Strategy steering
committee, which the CEO and CFO
are both members of, the impact of the
Group’s operations is monitored,
mitigated and initiatives approved.
For more information see pages 61 to 77 in
our Sustainability Report
We have a comprehensive
Management Code of Conduct, which
in 2023 has been refreshed and
supporting policies, including
Whistleblowing, Anti-Bribery and
Corruption, and Human Rights Policies,
which set standards for ensuring that
our business activities are conducted
in a responsible manner for the benefit
of our shareholders, customers,
colleagues and suppliers. The Spirax
Group has zero tolerance to any form
of bribery and corruption, both within
our Group and in any dealings with our
customers, suppliers and other third
parties we may deal with.
All colleagues and Board members are
expected to demonstrate and promote
high standards of ethical business
conduct and to know and follow our
Management Code of Conduct with
pride. We provide a whistleblowing
facility, which is underpinned by our
Whistleblowing Policy, enabling
colleagues to make reports if they
suspect anything inappropriate or
experience any serious misconduct or
wrongdoing in our business. For more
information see page 69 in our
Sustainability Report.
The Board recognises our
shareholders and investors as
an important stakeholder group.
Through monthly calls with
shareholders and analysts, and by
providing regular forums for meeting
and communicating with shareholders,
their advisers and the investment
community, we ensure that we
understand the views and opinions of
our investors and are kept informed of
any concerns that may arise. We are
also able to give updates on our results
and developments within our
Businesses.
We undertook 242 investor meetings
during the year, the calendar on page
122 shows shareholder events
attended throughout 2023.
The AGM is an opportunity for
shareholders and investors to meet
with the Directors and put questions to
the Board. The Company proactively
encourages its shareholders to vote,
by way of a poll, at general meetings
by providing electronic proxy voting for
those who wish to vote online, and
personalised proxy cards to those
electing to receive them.
Spirax Group Annual Report 2023
123
Governance Report Board leadership and Company Purpose continued
Division of responsibilities
The Board has a collective responsibility for providing leadership, preserving
long-term value by anticipating business risks, monitoring performance and
promoting the Company’s culture and Values.
Group General Counsel and Company Secretary
The Group General Counsel and Company Secretary,
together with the Group Legal team including the Group
Assistant Company Secretary, support the Chair and the
Committee Chairs in making sure members are equipped
for informed decision-making and that they appropriately
allocate their time to subjects. All Directors have access to
the advice of the Group General Counsel and Company
Secretary as well as the Group Legal team, who are
responsible for advising the Board on all governance
matters. Both the appointment and removal of the Group
General Counsel and Company Secretary is a matter for
the whole Board.
Group Executive Committee
There is a clear division of responsibilities between the
leadership of the Board and our Executive leadership. The
Board relies on the GEC to run the business, holding them
accountable against targets and standards, while always
embracing the values of collaboration, integrity and respect
to achieve our goals. The GEC, led by our Group Chief
Executive Officer, is responsible for the management of the
Group’s short, medium and long-term performance;
stewardship of capital, technical and human resources;
corporate and business strategy; internal risk management
controls and organisational structure.
Delegation of Authority
An internal Delegated Authority matrix is operated ensuring
that decisions are taken at the right level within the Group
by those best placed to take them, whilst simultaneously
allowing the business to function efficiently. The matrix is
reviewed annually to accommodate any adjustments
required to ensure practical compliance.
The governance structure of the Group ensures the Board,
together with the Board Committees and Group Executive
Committee, has sufficient controls and oversight of the
business, with a balanced approach to risk that is aligned
with the Spirax Group’s culture. The structure assists the
Board in fulfilling its responsibilities and is designed to
ensure that the Board focuses on strategy, monitoring the
performance of the Group and governance, as well as risk
and control issues.
The Board is responsible for the stewardship of the Group’s
strategic risk management and internal control environment.
The Board is supported by the work of both the Audit
Committee and the Risk Committee in this area. The Board
remains satisfied with the identification and monitoring of
overall risk management and internal controls around the
Group and is supportive of the continuous improvement in
these areas.
An overview of the division of responsibilities, as set out in
the Code, is provided in the diagram opposite and we
comply with all the relevant Principles and Provisions. The
responsibilities of the Chair, Group Chief Executive Officer,
Senior Independent Director, Board and Committees are set
out in writing and agreed by the Board. A clear division is
made between the leadership of the Board and Executive
leadership.
The Role of the Board
The Board is collectively responsible for the long-term
success of the Company. The business of the Company is
managed by the Board who may exercise all the powers of
the Company. The Board has a formal schedule of matters
reserved for the Board’s decision-making which is available
on the Group’s website. Although the Board retains overall
responsibility, it delegates certain matters to the Board
Committees and the detailed implementation of matters
approved by the Board and the day-to-day operational
aspects of the business to the Group Executive Committee
(GEC).
Board Committees
Board Committees provide an opportunity for Directors to
focus on specific areas of the Group. This allows for greater
scrutiny in key areas such as Remuneration, Audit and Risk
Management, Colleague Engagement and Board succession
planning and Talent development. The Board Committees
consist of Non-Executive Directors and each Committee
Chair reports to the Board on matters discussed at
Committee meetings and highlights any significant issues that
require Board attention. The terms of reference for each
Board Committee are reviewed annually and are available
on the Group website. The annual Reports by each Board
Committee Chair are given in this Annual Report.
124
Spirax Group Annual Report 2023
Governance Report Governance framework
Board of Directors
• Responsible for setting the Group’s strategy and ensuring
strategic objectives are met
• Direct involvement in all ESG matters.
• Assesses culture and promotes the long-term success of
the Company
• Responsible for overall Risk Management
• Ensures maintenance of a framework of prudent and
effective controls
• Ensures effective engagement with shareholders and all
our stakeholders, including the workforce
• Approves the Company’s financial statements and
• Approves matters relating to the composition of the Board
performance expectations
and Committees
Chair
• Responsible for the
leadership and effectiveness
of the Board
• Promotes a culture of
openness and debate
• Facilitates constructive
Board relations
• Holds meetings with
Non-Executive Directors,
without Executive
Directors present
• Ensures that the Board
listens to the views of
shareholders, the workforce,
customers and other key
stakeholders
• Responsible for all
Environmental, Sustainability
and Governance matters
• Responsible for ensuring
that the Board considers all
Strategic Risks
Senior Independent
Director
Group Chief Executive
Officer
• Provides a sounding board
• Responsible for the
to the Chair
• Serves as an intermediary
for the other Directors and
shareholders
• Leads an annual meeting of
Non-Executive Directors to
appraise the Chair’s
performance
day-to-day running of the
Group’s business and
performance and the
implementation of strategy
• Leads the Group Executive
Committee
• Represents management
on the Board
Designated workforce
engagement NED
Non-Executive Directors
• Chair of the Colleague Engagement
Committee
• Responsible for colleague engagement
• Facilitating two-way dialogue between
the Board and its Committees and the
Workforce, flagging issues and feedback
to the Board
• Provide constructive challenge, strategic
guidance and offer specialist advice
• Hold a prime role in appointing and
removing Executive Directors
• Scrutinise and hold to account the
performance of management and
individual Executive Directors against
agreed performance objectives
Group General Counsel and
Company Secretary
• Advises the Board on all governance matters
• Supports the Board to ensure that it has
the policies, processes, information, time
and resources it needs for the Board to
function effectively and efficiently
• Advises the Board on important legal
and regulatory matters
Audit Committee
Nomination Committee
Remuneration Committee
The overall purpose of this
Committee is one of oversight
and monitoring of the entire
financial reporting and control
process, to ensure the integrity
of the Group’s Financial
Statements and assurance over
them.
The main role of
this Committee is to
recommend changes to the
Board and consider succession
planning for the future.
This Committee determines the
philosophy, principles and
policy of Executive Director
and senior manager
remuneration having regard to
the latest legislation, corporate
governance, best practices and
the FCA Listing Rules.
Colleague Engagement
Committee
The principal remit of this
Committee is to ensure that the
voice of the workforce is
considered in all aspects of the
Board’s thinking.
Group Executive Committee
The Board relies on the Group Executive Committee to
implement the strategy and run the business by empowering our
colleagues to do their part in the strategy execution. The
emphasis is on growth and on an entrepreneurial approach with
a strong governance culture. The Board holds this team
accountable against targets and standards and ensures that it
has strong and effective leadership in place to execute the
strategic plan.
Risk Management Committee
This Committee oversees the management and control of
significant operational risks affecting the Group. The Committee
ensures that the Group has risk management policies and
procedures, including those covering project governance,
sanctions and embargoes, crisis management, human rights,
business continuity and business management.
Spirax Group Annual Report 2023
125
Governance Report Board leadership and Company Purpose continued
Board composition, succession and evaluation
We make sure that the Board is actively involved
in all important Group matters and it is effective
in fulfilling its role as a balanced Board.
During 2023, in compliance with the Code, the number of
Non-Executive Directors was always more than the number
of Executive Directors (excluding the Chair). At the time of
publication, our Board comprises one Executive Director, a
Non-Executive Chair and a further seven Non-Executive
Directors. Ordinarily there are two Executive Directors,
however Phil Scott has not been appointed as a statutory
director. When Louisa Burdett joins in July 2024 she will be
appointed as a statutory director bringing the total back up
to two. This ensures that no one person or group of
individuals dominates the Board’s decision-making. All our
Non-Executive Directors, including the Chair, are
considered independent.
Board succession and tenure
The Nomination Committee continuously reviews succession
plans in light of strategy, business requirements, tenure and
diversity. For more information on succession planning
please see the Nomination Committee Report on pages 132
to 137.
With regard to the appointment and replacement of
Directors, the Company is governed by its Articles of
Association (Articles), the UK Corporate Governance Code
(the Code), the Companies Act 2006 (the Act) and related
legislation. The Articles themselves may be amended by
special resolution of the shareholders. The Articles provide
that Directors may be appointed by an ordinary resolution of
the Company’s members or by a resolution of the Directors.
With the exception of Nick Anderson who stood down in
January 2024, all other Directors including the Chair who
will, in any event, be stepping down during 2024 as required
by the Code, will stand for election or re-election as
required by the Code. The Board’s recommendations
concerning appointment or reappointment are contained in
the Nomination Committee Report on page 132.
The Executive Directors have service contracts that can be
terminated on twelve months’ notice. The appointments of
the Non-Executive Directors can be terminated on one
months’ notice. The Chair’s appointment can be terminated
on three months’ notice. Details of the Directors’ service
contracts can be found in the Directors’ Remuneration
Report on page 162.
External listed company appointments
The Board believes that Directors should be able to accept
other appointments where no significant actual or potential
conflicts of interest arise and provided that the Director is
able to maintain sufficient time available to discharge their
duties effectively. These other appointments enable Directors
to develop further skills and experience from which the
Company benefits, provided that such commitments do not
impinge on their duties to the Company.
Existing commitments of Directors are carefully reviewed
prior to appointment and on an ongoing basis to ensure they
can continue to deal appropriately with the affairs of the
Group. If a Board member wishes to accept an additional
position this must be reviewed and approved by the Chair.
Significant changes in a Director’s outside commitments are
discussed with the Chair prior to a Director accepting
further appointments.
At each Board meeting and also on an annual basis, each
Director confirms their external appointments and commitments
to the Board as part of the conflicts of interest check. Nick
Anderson was also a non-executive director of BAE Systems
plc, a FTSE 100 company, which is acceptable under the Code.
The number of external appointments held by our
Non-Executive Directors and full-time Executive Directors,
as at 31st December 2023, are provided in the table below,
details can be found in the Director’s biographies on pages
112 and 113. Only positions in listed companies or
equivalents in other jurisdictions are counted in accordance
with the provisions of the guidelines published by Institutional
Shareholder Services and other proxy advisers.
No. of
other
Non-
Executive/
Chair
roles
Total no. of
mandates (in
accordance
with ISS
guidelines)
including the
Spirax Group
No. of
other
Executive
roles
1
1
—
1
1
1
1
—
—
1
—
—
—
—
3
2
4
2
3
2
4
Listed Plc Directorships
Independent Non-Executive
Directors
Jamie Pike (Chair)
Angela Archon
Peter France
Richard Gillingwater
Caroline Johnstone
Jane Kingston
Full-time Executive Directors
Nicholas Anderson
126
Spirax Group Annual Report 2023
Governance Report Register of conflicts
The Board formally considers any potential conflicts
between a Director and the Company. Any situational
conflicts must be notified to the Board for authorisation as
and when they arise, notwithstanding a Director’s general
duty to avoid such conflicts. Transactional conflicts must be
notified to the Board in person or in writing at the next
meeting, where the Board can decide, in the absence of
the Director concerned, whether or not to authorise such
conflict and how to manage the conflict if authorised.
Induction, development and information flows
New Directors receive formal induction training, including,
when possible, site visits and meetings with the Company’s
advisers, brokers, auditor and where appropriate, major
shareholders. Ongoing training is encouraged and provided
upon request and as appropriate. This training is customised
for each Director and varies depending upon their skills,
experience and background. Governance training is undertaken
annually by the Board and the Audit Committee also
arranges ESG, financial and related training each year.
Directors also receive regular updates on changes and
developments in the business, legislative and regulatory
environments. A copy of the Directors’ statutory duties is
available at every Board meeting. Directors are encouraged
to discuss with the Chair any further training requirements
which they feel are needed. This is included in the
discussions held during the annual performance evaluation.
Good information flows between the Board and
management are essential for effective governance.
The Board, together with senior management, ensures:
• the agendas are appropriate for the business and are
forward looking as well as providing historical and current
results data
• papers are of an appropriate length and content for the
Non-Executive Directors to be able to understand and review
• sufficient time is given for Directors to read and review
the papers prior to meetings
Board diversity policy
Spirax Group is diverse in many ways. We encourage
differences in ethnicity, gender, language, age, sexual
orientation, religion, socio-economic status, physical and
mental ability, thinking styles, experience and education.
We believe that the wide array of perspectives that results
from such diversity promotes innovation and business
success. Managing diversity makes us more creative, flexible,
productive and competitive. Information on Diversity and
Inclusion in the wider Group can be found on pages 67
to 68 of the Sustainability Report and on our website
spiraxgroup.com/inclusion.
The purpose of our Board Diversity Policy is to ensure an
inclusive and diverse membership of the Board of Directors
resulting in optimal decision-making and assisting in the
development and execution of a strategy which promotes
the success of Spirax Group for the benefit of its
shareholders as a whole, having regard to the interests of
other stakeholders. This policy applies to the Board of
Directors, Board Committees and the Group Executive
Committee and a copy of the Policy can be found on our
website spiraxgroup.com/governance-documents.
Further information on Board and Committee diversity and
succession planning can be found on pages 132 to 137, The Board
at a glance, and in the Nomination Committee Report on pages 132
to 137
Board Effectiveness and Evaluation Process
The Code requires a company to evaluate its performance
annually with an independent external evaluation conducted
at least every three years. In the intervening years the Board
conducts a self-evaluation. In addition to this, each Non-
Executive Director, the Group Chief Executive and the Chief
Financial Officer met with the Chair individually to discuss
their personal performance. The Directors provided input to
the Senior Independent Director (SID) on the performance
of the Chair. On the basis of that feedback the SID reviews
the performance of the Chair, including leadership of the
Board and ensuring effectiveness.
Following the external and independently facilitated Board
evaluation by Egon Zehnder in 2021, the Board conducted,
with administrative assistance from Egon Zehnder, an
internal Board evaluation in 2022 and again in 2023.
Full details of the evaluation process and outcomes can be found in
Nomination Committee Report on page 134 to 136
Spirax Group Annual Report 2023
127
Governance Report Board leadership and Company Purpose continued
Colleague Engagement Committee Report
2023 was a more challenging backdrop than
recent years, with a weaker macroeconomic
environment and customer destocking in the
Semicond and Biopharm sectors, so having a well
established form of direct engagement with
colleagues across the Group was invaluable.”
Caroline Johnstone
Chair of Colleague Engagement Committee
Members
Caroline Johnstone (Chair)
Angela Archon
Constance Baroudel*
Peter France
Jane Kingston
Jamie Pike
* Appointed to the Committee 1st January 2024
How the Committee spent its time %
31%
19%
11%
15%
24%
Direct colleague engagement follow-up
Committee remit, planning and approach to engagement
Business updates on colleague engagement
Current engagement practices and survey results
Formal items
128
Spirax Group Annual Report 2023
Committee role and responsibilities
The Colleague Engagement Committee (the Committee) marked
its fifth year as a standing Committee of the Board, meeting
Provision 5 of the UK Corporate Governance Code 2018
and working to ensure our Colleagues’ voice is heard and fully
considered in decisions of the Board. Each year, the Committee
develops a unique agenda to reach out and listen to colleagues
across the Group worldwide, in order to receive feedback and
insights from all levels of the Company, provide oversight and
make recommendations to the Board on all aspects of
colleague engagement. Our annual programme of activities are
prioritised based on feedback from Colleague Engagement
Surveys, recent initiatives in the business, or other activities
that the Board may want to better understand. We believe this
tailored approach allows the Committee to keep our
engagement mechanisms relevant and effective, in line with the
requirements of the Code.
The Committee’s activities create both a formal and regular,
two-way, direct dialogue between the Board and colleagues,
as well as an opportunity for informal, one-on-one interactions.
The Committee Chair reports back to the full Board after each
Committee meeting with key findings and actions arising. The
main duties of the Committee include:
• A programme of engagement activities to enable the Board
(and Non-Executive Directors in particular) to have regular
dialogue with colleagues
• Overseeing the approach to, the results and the action-plans
of each biennial global colleague engagement survey, more
details of which can be found on page 130
• Regular engagement with senior management across the
Group to understand ongoing and developing engagement
practices
• Supporting the Audit Committee and the Board in ensuring
that procedures are in place for colleagues to raise concerns
anonymously and in confidence, are accessible and
well-publicised
Governance Report Reviewing the effectiveness of our approach to
workforce (colleague) engagement
The Board continues to review its mechanism for workforce
engagement as required by the Code. In 2019, we
established a separate Committee of the Board to focus on
matters of workforce engagement and Caroline Johnstone
was appointed as Chair of the Committee and the
designated Non-Executive Director for colleague
engagement, based on her previous people leadership roles
in PwC and other businesses.
The Board concluded that the Committee and the colleague
engagement programme adds significant value and insight
both to the Board and to executive management, and the
Board regularly reflects on colleague views during Board
deliberations. The Board continues to believe that a
Board-level Committee with responsibility for colleague
engagement is appropriate given the size, scale and
business model of the Group. It affords dedicated time to
colleague engagement and culture generally across the
Group. We have also had feedback that colleagues feel the
direct engagement with a Board member promotes open
and inclusive discussions and valuable feedback.
Committee meetings and operation
The Committee held three meetings in 2023 (details of
attendance can be found on page 115). In addition to
Committee Members, our Group Chief Executive Officer and
Chief Financial Officer also attend some part of all
Committee meetings – they bring further insight to
colleague engagement across the Group but are also keen
to understand and reflect on colleague feedback. Other
Non-Executive Directors also regularly join these meetings
and participate in many of the engagement activities
throughout the year.
In February, the Committee amended its name, replacing
“Employee” with “Colleague” to bring the Committee in line
with the language used across Spirax Group. This name
change was also reflected in an amendment to our Terms of
Reference, which can be found on our website, spiraxgroup.
com/governance-documents.
Amanda Janulis, Group Divisional Counsel, is the secretary
to the Committee. During 2023, the Committee has
continued to work with Amanda and Jim Devine, Group HR
Director. Sarah Petherick, Group Head of Colleague
Experience, joined the team in 2023, bringing fresh
perspective and insights to the work of the Committee, as
we continue to develop and implement a very rich
programme.
Chair’s review of 2023
In 2023, with a weaker macroeconomic environment and
customer destocking in the Semiconductor and Biopharm
sectors, it was a more challenging backdrop than recent
years, so having a well-established form of direct
engagement with colleagues across the Group was
invaluable. We were able to hear the views of colleagues in
all parts of the Group, and there are common themes
(discussed below) which align with feedback from our
colleague survey. The discussion and feedback meetings
continue to allow us to test our understanding of the Group
culture and add value to the Board discussions. For more
discussion on the Group’s culture and Values, see page 8,
as well as the Sustainability Report on page 60. As Chair, I
am always struck by the open nature of the discussions and
opportunities to recognise both the strengths of the
organisation and also the opportunities for continuous
improvement.
Key activities undertaken and Committee approach
S e n i o r leadership
e d c o l l eague engag
e
l i
a
u
Q
t a t ive insig
h
t
s
m
e
n
t
t
e
T a r g
Census
data
• Business unit presentations at Colleague engagement
committee meetings
• Management reporting updates post focus groups
• Global Leadership conference – attended by
approximate 80 colleagues from all parts of the Group
• Overseeing the Group response and approach to the
Race Equity initiative in the US
• Engaging with Graduates during their annual
conference
• Ten structured focus groups involving over 100
colleagues from different areas of the Group
• NED virtual ‘coffee talks’ with randomly selected
colleague, run quarterly
• Biennial colleague engagement survey – quantitative
data with demographic filters and approximately
13,000 verbatim comments
Spirax Group Annual Report 2023
129
Governance Report Board leadership and Company Purpose continued
Colleague Engagement Committee Report continued
Themes from discussions with colleagues
The majority of the time in the discussion group is spent
asking colleagues for their views on a handful of topics. In
2023, our typical areas included understanding colleagues
perception of and engagement in our business,
sustainability and inclusion strategies and a particular focus
was around the challenging economic environment and the
cost-of-living challenges across our many different
locations. We have also continued to explore how well we
live our Values (and Safety in particular). But, we also leave
plenty of space to hear what’s on our colleagues’ minds.
Over the course of our 2023 discussion and feedback group
sessions, we have identified some common themes with
respect to what makes the Group a great place to work and
what we could do better. These themes align well with the
results of the colleague engagement survey and we get
additional rich feedback on these areas from the discussion
groups.
Many of our colleagues consistently highlight four strengths,
which they value highly:
• A safety mindset ’first and foremost’ – this is particularly
reinforced by colleagues new to the Group
• A strong Values-based culture – colleagues regularly
share examples of living our Values in the real world,
which deliver better customer service, grow the business
and improve colleague experience
• A sense of belonging within supportive teams – most
colleagues we speak to feel part of a ’local’ business,
where they have a sense of being involved, listened to
and permission to be entrepreneurial
• The introduction of inclusive policies, such as gender-
neutral policies for parental leave and carers leave, is
seen as being best-in-class
The feedback on these strengths and the survey results
show significant shifts in positively shaping culture. The
Committee particularly noted the best-in-class response
rate to the engagement survey.
We also heard consistently that colleagues appreciate both
being part of a resilient and strong Company and the
Group’s approach to supporting them through the cost-of-
living challenges of 2023.
There are also consistent themes as to where the Group
might be able to improve, in essence they suggest that we
could make doing business easier for our people:
• Making collaboration easier: our highly successful
business model provides a focus for our operating
companies and there is more to be done to make it easier
to collaborate between sales, supply and business
development teams
• Making our systems more efficient: the Group is making
significant investment in our systems but this isn’t yet felt
in many areas of the Company
• Enhancing and streamlining our internal communication:
colleagues (particularly those in our smallest operating
companies) can feel the pressures of dealing with and
responding to the reporting needs of a global, publicly
listed Company as well as numerous initiatives that the
Group is investing in. There is huge positivity about the
initiatives (including sustainability, digitisation and
inclusion), but some colleagues feel they need more
streamlined and focused communications and a way to
prioritise demands
• 2023 has presented different challenges for colleagues.
Some colleagues have felt more pressures this year, as
the economic environment deteriorated throughout 2023.
Some have asked for more thought and engagement
around target setting in these difficult times
The Group commenced important race equity work this
year, supported and overseen by the Committee. Driven by
the desire to more deeply understand 2021 Colleague
Engagement Survey scores in the USA, this work started by
commissioning a third-party race equity specialist to design
and run roundtables for Black and African American
colleagues as well as a roundtable for colleagues who
expressed an interest in taking part as allies.
Four common themes emerged from the round tables,
including that colleagues feel disempowered in career
development, held to higher work standards and lack
support. They also shared that they had low expectations
that anything would change following the sessions.
A member of the Committee, Angela Archon, attended some
of the roundtables and follow up discussions and has
provided valuable insight and challenge from her own
considerable experience.
Action planning based on these discussions is now
underway. A wider Group focus on race equity has
complemented this, including global anti-racism webinars
and launching a new Multicultural Global Network for
colleagues. It was agreed that race equity would be a key
focus for management and the Board going forward. The
Committee noted progress achieved when other aspects
of diversity had seen management focus, although
members recognise that it will take time to truly embed
change that is meaningful and permanent. Plans (at local,
regional and Group level) are being developed to address
the feedback which will be reviewed by the Committee in
early 2024. It is also intended to run similar roundtables for
colleagues in other geographies.
130
Spirax Group Annual Report 2023
Governance Report Management actions arising from our colleague
engagement
We share and discuss the general themes from each
meeting with local and divisional management and we ask
them to share with the Committee any actions that arise
from the feedback. This has proved to be very effective and
we set out just a few examples of action taken:
Discussion Group
Feedback:
Management Action:
A sales team requested
greater autonomy to
support customers
with faults or
replacement parts and
questioned layers of
approval required.
Local managers met with Divisional
Sales Managers to understand their
concerns. As part of the Group
Finance G3 governance project, the
Delegation of Authority (DoA) was
updated to empower within the
context of G3 and to ensure clarity for
managers on the approval process.
Challenges in
understanding and
implementing the
business strategy in
day-to-day roles. We
heard the message:
“show me the strategy,
don’t tell me; I want to
understand my role in
these strategies.”
Colleagues requested
greater clarity on pay
structure/progression
and rewards.
Remote roles such as
Sales and Service
Engineers are working
more independently
than before, and
there is limited
downtime and no
opportunity to speak
whilst driving etc.
One of our Businesses created ’stand
up’ meetings in supply sites; these
were shorter learning sessions on
topics such as the strategy goals and
implementation. ‘Purpose workshops’
were developed for managers to focus
on personal contribution to Company
strategy.
The Company took a series of steps,
including setting up a working group,
making use of an app for colleagues to
communicate directly with the payroll
team and introducing HR surgeries/
clinics for colleagues to drop in with
queries and concerns.
The Group refreshed and
reinvigorated its focus on National
Sales Manager monthly ‘check ins’
with all field-based Sales Teams as
well as a quarterly collaboration event
among Service the teams.
Other Committee activities in 2023
Business unit discussions – While this year’s activities
focused more heavily on the Colleague Engagement Survey
and the Group-specific feedback and discussion meetings,
we again invited leaders to present to the Committee, in
order to share their approach to colleague engagement, as
well as their engagement successes and challenges. This
year, the Committee heard from leaders representing the
Steam Thermal Solutions Supply site in the UK. Colleague
engagement is also part of Board updates from each
Business during the year.
Board site visits – The Committee takes the opportunity to
connect with colleagues and local management when Board
meetings are held at various manufacturing sites across the
globe. In 2023, this included the Thermocoax facility in
Normandy (France), as well as the new Watson-Marlow site
at Devens, Massachusetts (USA). During these site visits,
Board members heard directly from colleagues about the
day-to-day workings of their site, the challenges they face
and the upcoming initiatives for their Businesses.
Informal engagement – All Non-Executive Directors
participate in ‘coffee talks’, an informal arrangement where
colleagues are randomly paired with another for a virtual
coffee. This gives the Directors an opportunity to speak to
colleagues at all levels of the Group one-on-one, to both
understand their role and gain their feedback on the
organisation and their experience working within it. Board
members also attended sessions at both the Global
Leadership Team annual business meeting and the
Graduate annual development programme where they were
able to talk in depth to a wide cross section of colleagues
from across the Group.
Benchmarking – Each year, the Committee undertakes an
evaluation of its effectiveness and at least one benchmarking
activity to ensure our activities reflect best practices and
are in line with the regulatory requirements. Additionally, we
use this as an opportunity to review what other opportunities
for colleague engagement might be feasible and effective
for our Group. This year, the Committee reviewed the colleague
engagement approaches implemented by a selection of
peer businesses within the FTSE 100 and considered
whether some of those approaches might be beneficial for
our own Committee agenda. In general, the Committee
believes that it is working well and that it is adding value to
the Board and this is supported by feedback from the
Board, the executive and the wider organisation. Committee
members are keen to interact with even more colleagues
when undertaking site visits in 2024.
Looking forward
We set out below our three key priorities as a Committee for
2024. Committee members will participate in areas of our
work, including race equity and ensuring we hold colleague
discussions in local language, where practical. For instance,
our new member, Constance Baroudel will hold discussions
with our growing number of French speaking colleagues.
Finally, I want to say my personal thanks to Nick Anderson.
He has been a true advocate of colleague engagement, was
instrumental in establishing the Committee and then
encouraging and supporting the development of the
Committee’s work.
I am happy to answer any questions or take any feedback
on our Committee activities, at our Annual General Meeting
in May or at any time.
Caroline Johnstone
Chair of Colleague Engagement Committee
6th March 2024
Committee focus for 2024
• Overseeing response to the 2023 Group-wide
engagement survey and the feedback themes
• Colleague discussion and feedback meetings,
including with colleagues in businesses recently
acquired by the Group
• Overseeing actions to address the feedback from our
Black and African American colleagues across our US
operations to advance our race equity focus, with a
view to potentially expand our race equity work to
other areas of the Group
Spirax Group Annual Report 2023
131
Governance Report Composition, succession and evaluation
Nomination Committee Report
We have implemented our succession policy with the
appointment of Nimesh Patel as our Group Chief Executive
Officer. Louisa Burdett joins as Chief Financial Officer
(CFO) in July with Phil Scott stepping up as Interim CFO
until her arrival. Constance Baroudel is making a valuable
contribution as a Non-Executive Director.”
Jamie Pike
Chair of Nomination Committee
Committee role and responsibilities
The main role of the Nomination Committee is to optimise
Board performance, consider succession planning and
recommend changes to the Board to match the skills,
knowledge and expertise of individuals to those needed to
support the strategy and business requirements of the Company.
The Committee’s responsibilities include:
• Making appropriate recommendations to the Board for the
appointment, reappointment or replacement of Directors
• Reviewing the structure and composition of the Board with
regard to the overall balance of skills, knowledge and
experience against current and perceived future
requirements of the Group
• Considering succession planning arrangements for the
Executive Directors and more generally, senior executives
• Overseeing the annual evaluation of the Board and individual
Directors, taking into account its composition, diversity and
effectiveness
The full Committee terms of reference can be found on our website,
spiraxgroup.com/governance-documents.
Key activities undertaken
The Nomination Committee met five times in 2023, details of
attendance can be found on page 115. The Group Chief
Executive and Group Chief Financial Officer were invited to
meetings where appropriate. A summary of the Committee’s
activities throughout the year is set out on the following page.
Chair’s review of 2023
Our focus during the year was on the appointment of a new
Group Chief Executive Officer and Chief Financial Officer.
We also started the process for the appointment of a new Chair
and completed the appointment of Constance Baroudel as a
Non-Executive Director.
Members
Jamie Pike (Chair)
Angela Archon
Constance Baroudel
Peter France
Richard Gillingwater
Caroline Johnstone
Jane Kingston
Kevin Thompson
How the Committee spent its time %
40%
35%
25%
CEO succession planning
Chair succession planning
CFO succession planning
132
Spirax Group Annual Report 2023
Governance Report June
• Start of the formal process
for the appointment of a
new Group Chief Executive
Officer
• Executive succession
planning for all senior
management levels
• Group Executive Committee
(GEC) leadership
development
August
• Appointment of
Constance Baroudel as a
Non-Executive Director
• Conclusion of succession
planning for the
appointment of a new
Group Chief Executive
Officer and planning for
the appointment of a new
Chief Financial Officer
October
• Chair
succession
process
initiated
November
• Conclusion of
succession
planning for
the
appointment
of a new Chief
Financial
Officer
December
• Continuation of Chair
succession planning
• Reappointment of Angela
Archon for a further
three-year tenure
• GEC and GEC+1 succession
planning
Board and Group Executive Committee composition
On 16th January 2024 Nick Anderson, the Group Chief
Executive (CEO), stepped down following his 10th anniversary
in the role. The Committee, in conjunction with Nick, had
been developing the Group’s leadership and talent
development programmes with a view to ensuring the
internal succession pipeline was strong. In 2023, the
Committee began its formal search for a successor to Nick,
considering both internal and external candidates from a
diverse range of backgrounds with the assistance of Egon
Zehnder, recruitment consultants, resulting in the internal
appointment of Nimesh Patel to the role with effect from
16th January 2024. Details of the appointment process
undertaken can be found page 135.
The appointment of Nimesh Patel, who was Chief Financial
Officer from July 2020, was unanimously determined by the
Committee. Nimesh’s appointment as Group Chief Executive
Officer marks the completion of the Board’s long-term
planning for Nick’s succession. During his three-year tenure
as CFO and a member of the Board, Nimesh has played a
significant role in shaping our strategy, working with
colleagues to enhance our unique culture and business
model to fulfil our Purpose. The Board has observed
Nimesh’s natural leadership style and proven ability to
engage at all levels throughout the organisation and with
external stakeholders. His strategic approach and deep
understanding of our Businesses, together with his global
and financial experience all underpin the Board’s confidence
in the future leadership of our Group. The Board believes
Nimesh provides both continuity as well as progression in our
journey towards creating sustainable value for our all our
stakeholders and is already working closely with Nimesh,
supporting him on this journey.
We announced in December 2023 that Louisa Burdett will
join the Group in July 2024 as Chief Financial Officer (CFO).
Louisa is a highly experienced CFO having led finance
functions in several large companies including UK-listed
Croda, Meggitt and Victrex. She currently serves as a
Non-Executive Director and Audit Committee Chair of RS
Group plc. The recruitment of Louisa Burdett as successor
in the role of CFO followed our usual rigorous succession
process. Director of Group Finance, Phil Scott, will act as
Interim CFO until after Louisa joins and a smooth handover
has been completed. The rigorous recruitment process
drew on candidates identified by Spirax Group’s internal
leadership and talent programmes, as well as external
candidates with the assistance of Egon Zehnder.
In January 2023, Olivia Qiu stepped down from the Board of
Directors for personal reasons. A search for a new Non-Executive
Director was initiated and the Board was delighted to announce
the appointment of Constance Baroudel in August 2023.
Constance has related board experience, currently serving
as Sector Chief Executive, Environmental & Analysis and
Chief Sustainability Officer at Halma plc. Previously she has
held non-executive director positions at both Kier Group
and Synergy Health and has a broad range of knowledge
and qualifications, including an MSc in International Accounting
& Finance from the London School of Economics, an MSc in
Corporate Finance & Strategy and a BA in International
Relations, both from the Institut d’Etudes Politiques de Paris
(Sciences Po Paris). In this role, she will combine her strong
financial, strategic and non-executive experience with her
knowledge of large, global organisations, to support the
ongoing sustainable growth and success of Spirax Group.
The appointments of Nimesh Patel as Group Chief Executive
Officer, Constance Baroudel as a Non-Executive Director
and Louisa Burdett as CFO, followed Code-compliant,
rigorous and independent procedures in making these
appointments, supported by our external advisers.
We also spent time looking at the composition of the Group
Executive Committee (GEC). Digital is a pivotal cornerstone
to enhance our business model and ensure we deliver value
to our customers by building digital connections with products
and services, as well as improving our internal efficiencies
across our operational, innovation and people management
processes. Maria Wilson, who joined the business in March
2023, has joined the GEC to lead and accelerate the
delivery of the digital strategy across the Group.
Jane Kingston’s tenure as a Non-Executive Director will be
drawing to a close in 2025 and during 2024 the Committee
will begin succession planning for the position of
Remuneration Chair to ensure an orderly handover.
Details of the respective skills and experience of all Board and GEC
members are set out on pages 112 to 114.
Spirax Group Annual Report 2023
133
Governance Report Composition, succession and evaluation continued
Nomination Committee Report continued
Board and Committee evaluation
In 2022, we followed up on the prior year recommendations
of Egon Zehnder and the Board carried out an internal
additional evaluation of the performance of the Board and
the Board Committees, in accordance with the provisions of
the Code.
The 2022 review emphasised the following strengths:
• Strong sense of team identity and collaboration with high
levels of engagement. Trusted and respectful relationships
• The Board felt guided by a clearly defined vision and
strategy for the Company
• The Board fulfils its role in keeping sustainability objectives
top of mind for the Company
• The Committees are clearly defined and serve a
distinct purpose
The 2022 review helped the Committee to consider the
following areas for improvement and these continued to be
addressed in 2023:
• Sufficient time for keeping abreast of industry trends,
competitor activity and where future threats may emerge
• An opportunity to allow for more strategic discussion
and debate
For 2023, the Chair supervised and Egon Zehnder facilitated
the use of an equivalent survey from 2022 to distribute to
each of the Board members. They were asked to respond to
questions on both a quantitative and qualitative basis. The
review considered the strengths of the Board, the Colleague
Engagement Committee, the Remuneration Committee, the
Audit Committee and the Nomination Committee by looking
at individual capabilities and contributions, what the Board
does and the way in which the Board members work
together. By comparing the results between 2022 and 2023,
we were then able to evaluate areas where the Board has
improved, as well as areas that still require development.
The survey was a comprehensive questionnaire covering all
issues related to the effective running of the Board and the
functioning of the Committees. The responses were
consolidated and anonymised, with common themes
identified for the Board to determine key actions and next
steps for improving Board and Committee effectiveness and
performance. We were pleased to see that the conclusions
of the 2023 review were positive, suggesting an overall
improvement from the prior year across all the
key dimensions.
Chair of the Board tenure
As reported last year, Jamie Pike was reappointed as Chair
of the Company with effect from May 2021 for a further
three years despite this taking him beyond nine years since
appointed to the Board. The Committee considered that the
reappointment would be compliant with Provision 19 of the
UK Corporate Governance Code 2018 (the Code), which
allows for an extension beyond nine years’ service, as
although Jamie Pike has been a Non-Executive Director since
2014, he was only appointed as Chair five years ago, in 2018.
In order to ensure a successful handover of Group CEO
responsibilities from Nick Anderson to Nimesh Patel, the Board
agreed that Jamie will serve as Chair until no later than the end
of 2024, and, therefore, Jamie will stand for re-election as a
Non-Executive Director at the AGM in May 2024. This will
allow Jamie to provide valuable mentorship to Nimesh in his
new role of Group CEO and an appropriate hand over period
to a new incoming Chair. Jamie continues to provide strong
and effective leadership of the Board. The Committee
implemented the process for the Chair succession and
further information on this can be on page 135.
Succession planning and attracting talent
Egon Zehnder acts as external advisers to the Nomination
Committee, helping the Committee and the Board to make
sure we are well positioned and have proper succession in
place for all senior level appointments across the Group.
This ongoing search for the best people includes both
internal and external candidates, in line with our Diversity
and Inclusion Policy, to ensure that we attract and retain
the best talent. The Board confirms that neither it, nor any
of its Directors, have any connection with Egon Zehnder.
The search for a new Chair, which commenced in Q4 of
2023, is being led by the Nomination Committee, which is
made up entirely of independent Non-Executive Directors
and chaired by the Senior Independent Non-Executive
Director, Richard Gillingwater. The current Chair, Jamie Pike,
and any candidate who is a current member of the Board
have been, and will remain, excluded from the process in
accordance with the Code. The Committee, working with
Egon Zehnder, has developed a job specification, which
candidates will be evaluated against, and a shortlist has
been developed. The appointment will be approved by the
full Board following interviews with all Directors.
As previously indicated, the Committee confirms that
Jamie will stand down as Chair and Non-Executive Director
in 2024 allowing also for a handover period with the
incoming Chair, who will be announced following their
appointment. In accordance with our Board succession
plans, we will follow a Code-compliant, rigorous and
independent procedure to determine Jamie’s successor,
supported by our external advisers.
Further information on how appointments to the Board are made
can be found in the Governance statement on page 126
134
Spirax Group Annual Report 2023
Governance Report Board succession planning
In light of the Committee’s most recent activities, we have taken the opportunity to provide an insight into our approach
to succession and induction of our new Group CEO and the timeline for the recruitment of our new Chair. All processes
are designed to ensure the appointment of our directors is strategic, orderly and comprehensive and are conducted with
the assistance of Egon Zehnder, our Executive Search consultants.
CEO succession process
As a result of the process Nimesh Patel, the serving
CFO, was selected resulting in a second search
being initiated to identify his replacement which
followed a similar process. Louisa Burdett has since
been appointed and will start with the Group in July
2024. Since Nimesh has been a part of the business
for a number of years, his induction is primarily
focused on providing a robust understanding of his
new responsibilities. Nick Anderson will remain as a
colleague until the end of March 2024 to assist with
the transition and handover.
Succession planning
The talent pipeline for all senior roles is prepared,
identifying the emergency cover, medium-term (1-3
years) and longer-term (3-5 years) candidates who
meet current business needs. This includes
consideration of whether a role can be filled internally,
or whether external search is required.
Identify and develop
The candidates in the pipeline are mentored by
members of the Committee. In particular, those
identified for medium or longer-term plans are provided
with training and support to aid the Company’s ability to
promote internal candidates, in line with the Board
Diversity Policy.
Review
Review of the succession plans for the most senior
roles takes place periodically. Immediately following
notification of an incumbent director’s upcoming
departure, plans are considered and scrutinised
in-depth by the Committee and an executive search
firm, taking into account the prospective Group CEO’s
expertise, leadership style, and the current composition
of the Board. This includes both an assessment of
interpersonal dynamics of internal and external
candidates and a skills matrix. In this case it was
decided that there was no need to continue a search
externally as the internal candidates were all strong.
The shortlisted candidates presented their proposed
future plans for the Group to the Board.
Appoint
Having considered the requirements of the business, it
was agreed that Nimesh Patel would be recommended
for appointment to the Board as Group CEO.
Transition and Handover
Through retaining Nick Anderson within the Group until
the end of March 2024, the Board has ensured that
appropriate time for an orderly handover of the
business to the new Group CEO has been allowed for.
Our Chair appointment process
October 2023
Search criteria was developed
for Jamie Pike’s successor,
which included:
• Recent and relevant chief
executive and chair
experience
• Additional knowledge in
areas including data and
digital
• Executive search firm
engaged – Egon Zehnder
December 2023
Committee received a long list
of candidates who were
contacted to establish their
interest in the role.
January-February 2024
Interviews and meetings.
March-April 2024
Committee meeting will
discuss the proposal to
appoint preferred candidate,
with subsequent
recommendation to the Board
and approval of their
appointment.
March 2024 onwards
Once a new Chair has been
appointed a full induction
programme will be initiated.
This will include visits to key
sites, meetings with senior
management to bring them
closer to decision makers and
those tasked with running the
day-to-day management of the
business.
1
2
3
4
5
Search Criteria
The SID, working with the Board
(excluding the incumbent Chair)
the Group Human Resources
Director, the Group General
Counsel and Company Secretary,
determines the search criteria
using a skills matrix considering
the long-term strategic priorities of
the Group. This is provided to an
executive search firm, who is
asked to ensure the search
includes a diverse range of
candidates from various
backgrounds and industries.
Review and Identify
The executive search firms
review the specification and
produce a long list of candidates
for the Committee to review. The
SID identifies a shortlist of
candidates, following feedback
from the Non-Executive
Directors. These candidates are
contacted to establish interest.
Assess
Candidates are interviewed by
the SID and assessed in line with
the candidate specification.
Informal meetings with other
Board members and the Group
CEO are also conducted with
preferred candidates to determine
chemistry and interpersonal
dynamics and assess whether
their skills and experience would
be additive to the Board as a
whole.
Appoint
The Committee reconvenes to
consider and discuss feedback
received. Once a decision has
been made, the successful
candidate is recommended for
appointment to the Board and
the Group General Counsel and
Company Secretary is tasked
with the formalities.
Induction
The final step is to provide our
new Chair with a robust
induction, tailored to suit their
individual needs. This is an
invaluable step to not only
support directors in meeting
their statutory duties, but also
give them a comprehensive
introduction to the business and
its strategic priorities.
Spirax Group Annual Report 2023
135
Governance Report Composition, succession and evaluation continued
Nomination Committee Report continued
Board and Committee evaluation continued
In respect of 2022 areas of improvement, the 2023 review
indicated that both areas had improved, with the management
team having responded to the Board’s request for deeper
discussions around competitor activity, industry trends and
horizon scanning. The Board acknowledge that there is
always room for improvement but that there is a balance to
be struck between key short-term priorities and strategic
discussion and debate.
It also emphasised the following strengths:
• Strong sense of clarity on the Vision, Values and Strategy
for the Group which creates an aligned and collaborative
culture across the Board
• Continues to improve its effectiveness as it adopts and
implements previous review recommendations
• Good balance of support and challenge to executive
management
The review helped us to consider the following areas for
improvement and these will continue to be addressed in the
coming year:
• Consistent timely distribution of information to allow for
improved discussion and debate
• External input on specific topics such as horizon scanning
to inspire debate
In 2024 a full, externally managed, Board evaluation will be
undertaken in compliance with the Code.
Re-election of Directors
The Board has concluded that the performance of each of
the Directors standing for re-election continues to be effective
and that these Directors demonstrate commitment to their
role, including commitment of time for the Board and
Committee meetings and any other duties. Constance
Baroudel will stand for election following her appointment
during the year. With the exception of Nick Anderson who
stood down in January 2024, all other Directors including
the Chair who will, in any event, be stepping down during
2024 after serving 10 years as required by the Code, will
stand for re-election at the 2024 Annual General Meeting
and the explanation of how they contribute to the success
of the Company can be found in the Notice of AGM. Louisa
Burdett’s appointment as Chief Financial Officer and
Executive Director takes effect after the 2024 AGM in July
2024. She will therefore stand for election at the first AGM
after her appointment takes effect, namely, May 2025.
Inclusion, equity and wellbeing
We believe that the Board’s perspective and approach is
greatly enhanced by gender, age and cultural diversity and
we consider overall Board balance and diversity when
appointing new Directors. We also undertake reviews each
year of the bench strength of all senior executives and make
sure that diversity is considered in our succession planning
across senior roles.
136
Spirax Group Annual Report 2023
The Company captures gender and diversity data of colleagues
through voluntary disclosure via the internal HR portal
where possible or direct contact where not. For the Board of
Directors, we seek individual permission to share this data
on an annual basis. We do not prescribe set gender or
ethnicity categories, but ask for directors to self-describe
this. The information required by LR 9.8.6R(10) can be found
in the Directors’ report on page 179 and further information
on diversity and inclusion within the Group can be found in
our Sustainability Report on pages 67 to 68.
We have a strong focus on inclusion and are committed to
improving diversity across our Group. As at 31st December
2023, the Company has met or exceeded two of the three
diversity and inclusion targets set out in LR9.8.6R(9), namely
that it has met the 40% female representation target on the
Board and two Board members are from a minority ethnic
background exceeding the target of at least one individual.
The third target requires that at least one of the senior Board
positions (Chair, CEO, CFO or SID) is held by a woman, a
target endorsed by the FTSE Women Leaders review that
would like to see a woman in at least one of these roles by
2025. As at 31st December 2023, the Company has not met
this target, however once Louisa joins the Board as the CFO
in July 2024 this target will have been achieved.
We would also like to highlight that two of our Board
Committees, the Remuneration and Colleague Engagement
Committees, are currently chaired by women, namely Jane
Kingston and Caroline Johnstone respectively.
In 2023, following a rigorous recruitment process during
which both male and female candidates were considered,
Constance Baroudel was appointed as a Non-Executive
director to replace Olivia Qiu who resigned in January 2023.
Diversity and inclusion is always a key consideration in the
Board recruitment process and is at the forefront of the
Committee’s mind when making nominations to the Board.
In line with a new Parker review target, in support of our
commitment and in addition to our gender diversity targets,
the Board has set a further target of 25% of senior
leadership, made up of our Group Executive Committee
(GEC) and direct reports, to be from under-represented
ethnic groups by December 2027, currently this is 18.3%.
In 2023, Maria Wilson was appointed to our GEC. Our GEC is
now 22.2% women (2022: 12.5%, 2021: 0%) and we continue
to aim for 40% women on the GEC by December 2025 in line
with our Group Diversity Goals. Gender diversity of GEC
direct reports dropped slightly from 35.3% at the end of
2022 to 33.3% at the end of October 2023 (the data point
for the FTSE Women Leaders Review). This meant that
gender diversity of our senior leadership also dropped
slightly from 34.5% women to 31.7% in October 2023. We
remain committed to achieving a minimum of 40% women in
our senior leadership by December 2025, a goal already
achieved at Board level. Our Global Graduate Development
Programme exceeded its goal of 50% female intake for the
year, achieving 56%. We also achieved some progress on
increasing the number of women in commercial leadership
roles, taking this up to 11% by October 2023 with the
aspiration of reaching 20% by December 2025.
In support of our gender equity journey, we continued our
Women’s Executive Mentoring Programme and our partnerships
Governance Report with Women in Science and Engineering (WISE) and the
Women’s Engineering Society (WES). Our global Women’s
Network also continued to connect and support women and
allies across the Group. This included marking International
Women’s Day with a global webinar on ‘embracing equity’,
menopause awareness training and activity covering
wide-ranging topics such as endometriosis and menstrual
health, psychological safety and career development, as
well as allyship across genders.
As part of our wider commitment to gender equity, during
his tenure, Nick Anderson, served as an Ambassador for the
25x25 campaign which is seeking to achieve 25 female
CEOs in the FTSE 100 by 2025. Nimesh Patel, Group Chief
Executive Officer, continues his role as Co-Chair of the
FTSE Women Leaders Review which seeks to increase the
representation of women in senior leadership roles in
the FTSE 350 and top 50 private companies in the UK.
In 2023, we built on the 2022 launch of our global Inclusion
Plan (Everyone is Included) and our Group Inclusion
Commitments. This included:
• Formally launching our Group Diversity goals at our Global
Leadership Conference in March 2023 – setting out our
ambitions to continue to build our gender and ethnic diversity
• Further developing our inclusion maturity framework and
piloting self-assessment against this in our Steam Thermal
Solutions (formally Steam Specialties) Business
• Starting a focus on race equity in the USA through
roundtables with our Black and African American
colleagues and action planning with colleagues, leaders
and HR practitioners
• Embedding inclusion, equity, diversity and wellbeing in
global supplier selection and monitoring in collaboration
with Group Sustainability, as well as embedding inclusion
and wellbeing in our new Group Health and Safety
Excellence Framework
• Expanding our global LGBTQ+ Pride focus with
attendance at four UK Prides (Cheltenham, Gloucester,
Falmouth, Truro); three global Pride webinars; Pride
activity in Steam Thermal Solutions, Brazil, and in the
USA, including support for South Carolina Black Pride and
the Trevor Project
• Embedding inclusion, equity and wellbeing content into
our new Group-wide education platform, Spark, including
learning on global anti-racism, menopause, mental health,
allyship, equity and more
• Continuing to grow our colleague networks with three
new global networks: Disability and Difference, LGBTQ+
and Friends, and a Multicultural network
The Board was delighted to see that the progress made on
inclusion was recognised by colleagues around the world in
the 2023 Colleague Engagement Survey. Group-wide
(excluding colleagues who joined us through the acquisitions
of Durex Industries and Vulcanic), the survey’s Inclusion
Index increased 5 points to 73% positive (+1 vs industry
benchmark). In particular, the scores for “the Company
values and supports colleague diversity” jumped +9 points
to 78% and “I feel comfortable to be myself at work” increased
3 points to 79%. Our collective focus on inclusion, equity
and wellbeing continue to be a Group-wide priority.
Diversity and Inclusion Policy
Our Board and Committees fully comply with and support
the principles of our Everyone is Included Inclusion Plan,
our Group Inclusion Commitments and the Group Diversity
and Inclusion Policy, which was updated in 2023 to better
align with and reflect the Group’s focus on Diversity and
Inclusion. We also approved the Group’s ambitious new
Diversity goals. The Board believes that diverse teams bring
a great variety of thought, skills, experience and
perspectives to our Group. That diversity means we’re more
innovative and more creative and it helps ensure our
continued business success. It means we continue to grow
and it creates more opportunities for everyone – in short, our
difference is our strength.
We firmly believe that we have furthered our strategic plans
through our Succession and Inclusion Policies and our
Diversity goals.
We remain committed to developing a strong and diverse
Board and we have made progress in developing our
internal talent at the executive senior leadership level.
A copy of the Board Diversity Policy and the Group Diversity
and Inclusion Policy can be found on our website
spiraxgroup.com/governance-documents.
Jamie Pike
Chair of Nomination Committee
6th March 2024
Committee focus for 2024
• Chair Succession
• Preparations for Remuneration Committee Chair
succession in 2025
• Executive succession at all senior levels
• Implementation of the Group Inclusion Plan within
Vulcanic and Durex Industries
Further reading
Our new Group Inclusion Plan and Commitments can be found on our
website: spiraxgroup.com/inclusion
Spirax Group Annual Report 2023
137
Governance Report Audit, risk and internal control
Audit Committee Report
The Committee continues to support
management in building on the strong
foundations of controls, governance and reporting
which underpin Group operations.”
Kevin Thompson
Chair of Audit Committee
Members
Kevin Thompson (Chair)
Peter France
Richard Gillingwater
Caroline Johnstone
How the Committee spent its time %
25%
25%
20%
12%
10%
8%
Financial resilience, risk management and internal controls
Corporate governance (including ESG updates)
and whistle-blowing
External audit and auditor effectiveness
Internal audit and fraud risk reviews
Presentations by Business Finance Directors
Results review and reporting
138
Spirax Group Annual Report 2023
Committee role and responsibilities
The overall purpose of the Audit Committee is to oversee and
monitor the entire financial reporting and control process, to
ensure the integrity of the Group’s published financial
information and assurance over it.
The Committee’s published Terms of Reference are reviewed
annually and were last amended in October 2023. A full copy
can be found on the Group’s website, spiraxgroup.com/
governance-documents.
Within the Terms of Reference the Committee’s responsibilities
are separated into six main areas:
• Financial Reporting
• Internal Controls
• Whistle-blowing
• Risk Management
• Internal Audit
• External Audit
The Committee meeting agendas are tailored to ensure all the
identified areas are covered, while also allowing for emerging
topics to be included and permitting time for sufficient
discussion and review. A summary of the Committee’s activities
across each area during 2023 is detailed on the following pages.
The Committee is comprised entirely of independent Non-Executive
Directors. Except for Olivia Qiu, who stepped down from the
Committee in January 2023, all other members of the
Committee served throughout 2023. All members of the
Committee have a depth of financial and commercial
experience in various industries, as well as the industrial
engineering sector in which the Group operates. The
Committee expertise, together with their independence,
enables them to provide robust challenge to management, as
well as to the internal and external auditors to ensure their
duties under the Terms of Reference are fulfilled. For the
purposes of the UK Corporate Governance Code 2018 (the
Code) the Board is satisfied that Kevin Thompson (Chair),
Richard Gillingwater and Caroline Johnstone have recent,
extensive and relevant financial experience and the required
competence in accounting.
Governance Report A more detailed summary of the qualifications, skills and experience
of each Committee member can be found on pages 112 and 113.
Meetings in 2023
The Committee held five scheduled meetings during 2023.
Outside of formal meetings a number of the Committee
members engaged in working sessions with management
during the year in order to support audit and assurance
activities around the Group.
As with prior years, relevant members of the Group’s senior
management attended Committee meetings, including the
Group Chief Executive, the Chief Financial Officer, the Head
of Internal Audit and the Director of Group Finance.
Continuing the practice started in 2020, each of the Group’s
three Business Finance Directors were invited to attend and
present to the Committee during the year.
During 2023, the Committee received reports from Internal
and External Auditors on the major findings of their work
and the progress of management follow-up by way of
management reports. As a safeguard, the Committee holds
separate meetings with the Internal and External Auditors
without management present to discuss the respective
areas and any issues arising from their audit work.
During the year, tailored update sessions are delivered by
external providers to the Committee members in order to
provide detailed insight into current areas of Committee
focus, and these included a number of updates on proposed
Corporate Governance changes in the UK. A cyber security
focused session, including case studies of cyber-attacks on
public organisations, is already planned for early 2024.
Committee focus for 2024
• The Group’s G3 internal controls improvement project
• Our ongoing assurance journey with a particular focus
on sustainability reporting
• The ongoing, multi-year projects to upgrade the ERP
systems in each Business
• Progressing the integration of the Vulcanic and Durex
Industries acquisitions
• Continuing to monitor and prepare for the future
changes to the UK Corporate Governance Code
requirements
Chair’s review of 2023
I am pleased to present the Audit Committee’s report for the
year ended 31st December 2023. The report is intended to
describe how the Committee discharged its core
responsibilities in overseeing and monitoring the Group’s
financial reporting and control processes to ensure the
integrity of the published financial information. I would also
like to highlight a number of important activities which the
Committee has undertaken during the last year in order to
meet the evolving requirements of the Group’s stakeholders.
During the year we have closely monitored the proposed
changes to the UK Corporate Governance Code, particularly
those which have been clarified in the FRC guidance
released in January 2024. We have worked closely with
management to support the Group’s internal controls
improvement ‘G3’ Project that aims to systematically
improve and standardise controls across the Group using a
risk-based framework. This workstream has been supported
with additional investment into our Governance teams and
supporting infrastructure, with team members being
geographically located close to the Group’s key operations
in order to partner with the operating businesses to support
implementation and provide best practice guidance. The
Group also undertook a detailed assurance mapping
exercise which was segmented into the key areas of
external reporting and disclosure. Following this exercise,
the Committee engaged with the Group Sustainability team
to conduct a deep dive into the current, upcoming and
potential regulatory reporting requirements in order to
develop a risk-based roadmap identifying specific focus
areas and those where increased levels of assurance will be
targeted over time.
The Group acquired Vulcanic and Durex Industries during
the second half of 2022 and during the year the Committee
has continued to monitor and support the integration of
both businesses into the Group. This has involved
engagement with management responsible for the
integration, as well as both the Internal and External Audit
teams, and has covered a wide scope of underlying
activities, including Health and Safety standards, financial
reporting, internal controls and sustainability. All key sites
within both Vulcanic and Durex Industries have been visited
by the Internal and External Audit teams with a series of
action plans agreed for implementation during 2024.
Spirax Group Annual Report 2023
139
Governance Report Audit, risk and internal control continued
Audit Committee Report continued
Chair’s review of 2023 continued
Following the 2022 external audit tender and the
subsequent reappointment of Deloitte as the Group’s
external auditor, the Committee has been pleased with the
quality and effectiveness of Deloitte’s external audit. The
rigour, level of challenge, clear communication and
understanding of the key drivers of our business have
delivered high-quality audit insight, as well as facilitating a
productive relationship and valuable debate between
management, the Committee and the External Auditor. This
assessment of audit quality was supported by the results of
both (i) the agreed audit quality indicator metrics which
Deloitte report to the Committee and (ii) the feedback
scores received from the Group’s key businesses appraising
the external audit process. As targeted during the audit
tender, the use of data analytics has continued to progress
during the year. Andrew Bond has led the Deloitte audit
relationship with the Group for the past five years and as we
transition to a new lead audit partner the Committee would
like to thank Andrew for the insight, diligence and guidance
he has provided during his tenure. As agreed during the
tender process, Dean Cook will replace Andrew from 2024
onwards. In order to facilitate an effective transition, Dean
has spent time with management and attended a number of
Committee meetings during the year. The Committee is also
pleased with the continuing strengthening of relationships
across the Group with other audit, assurance and
professional services firms, including those outside the ‘Big
Four’. These have facilitated a broader insight and debate
into current market practice, issues and trends.
The Committee continues to work closely with the Group
Internal Audit team and was pleased by the high standards
the team continues to drive and the valuable insight which
their work delivered. During the year, the team successfully
re-introduced their guest auditor programme, which had
been suspended since 2020 due to pandemic-related travel
restrictions. This allows members of the global finance
community to accompany the Internal Audit team on audit
assignments, providing a valuable learning and development
opportunity across the function as well as a varied
perspective across the audits.
In addition to the workstreams detailed above, the
Committee has requested additional items on its meeting
agendas in response to stakeholder requirements and the
constantly evolving environments in which the Group
operates. Examples of such issues which we have
responded to during the year include the FRC consultation
of proposed UK Corporate Governance Reforms, monitoring
the impact on the Group’s defined benefit pension schemes
in light of the continued market volatility in interest rates
and inflation, and a continued review of cash flow
performance, financial resilience and debt refinancing. The
Committee also remains focused on supporting the journey
to upgrade the ERP systems in each of the three Businesses
challenging the alignment with strategy and progress of
projects. These systems will provide a platform to deliver
operational efficiencies and control automation
opportunities. Against the backdrop of the corporate
criminal liability legislation, the Committee continues to
monitor and assess fraud risk with further progress made
this year implementing the actions from the risk assessment
workshops we held in 2022.
Key activities undertaken
March
• Reviewed relevant sections of the 2022
May
• Update on planning for the Half Year review
August
• Reviewed the Half Year results and
Annual Report
• Reviewed external quality assessment
of Internal Audit
• Reviewed External Auditor
independence and effectiveness
• Update on compliance with UK
Corporate Governance Code and
Anti-Bribery & Corruption and
Sanctions regulations
from External Auditor and management
• Update on the Internal Audit programme
• Annual approval of Auditor Engagement,
Non-Audit Services and Employment of Audit
Staff policies and the Adjusting Items policy
• Assessment of External Auditor Effectiveness,
including Audit Quality Indicator (AQI) and
Component Feedback
• Update from the Group’s Tax and Treasury
• Update on whistle-blowing calls made
Committees
to the Group’s Safecall service
• Update on the Group’s sustainability
reporting
• Confirmation of External Auditor
reappointment for FY2023
• Update on Acquisition Integration planning
• Update on the Finance Vision and Roadmap
• Update on the Audit and Assurance Policy
• Presentation from the Steam Thermal
Solutions Business Finance Director
external announcement
• Reviewed the interim report of the
External Auditor
• Internal Audit update
• Reviewed Pension risk management
transactions
• Reviewed Group Treasury’s proposals
for Debt Refinancing
• Update on the Audit and Assurance Policy
• Assessed the requirements of the
Financial Reporting Council’s Minimum
Standards for Audit Committees
• Completed Committee self-assessment
and performance evaluation
• Reviewed Group Principal Risk – Loss of
critical supplier
• Update on Sanctions and Whistleblowing
140
Spirax Group Annual Report 2023
Governance Report The Committee also spent time during the year assessing
the Group’s cyber security preparedness, including
understanding the key learnings arising from a ransomware
simulation exercise which was delivered by a third-party
specialist to the Group Executive Committee during the
year.
As I look back on the past year, I am pleased with the work
undertaken by the Committee on behalf of all our
stakeholders. The Committee continues to support
management in building on the strong foundations of
controls, governance and reporting which underpin Group
operations. I hope that this report provides appropriate
context and understanding around the work of the
Committee through the year. We remain committed to
responding to the expectations of all our stakeholders and,
as always, we welcome any feedback and look forward to
continued engagement during the coming year.
October
• External Audit planning for the Full Year results
• Reviewed schedule and preparations for the drafting of the
2023 Annual Report
December
• Update from External Auditor
• Update on the G3 internal controls project
• Update on the proposed disclosure changes in the 2023
• Carried out annual review of the Committee’s Terms
Annual Report
of Reference
• Update on sustainability reporting, including input
from Deloitte on market background and peers
• Update on Group’s Mandatory Contract Practices, including
a case study on Watson-Marlow Fluid Technology Solutions
• Update from Chair of the Group’s Risk Management
Committee
• Reviewed Internal Audit function’s self-assessment on
effectiveness and external quality assessment update
• Approved the Internal Audit plan for 2024
• Presentation from the Watson-Marlow Fluid Technology
Solutions Business Finance Director
• Update on, and review of management response to,
a Safecall case
• Update from Chair of the Group’s Risk Management
Committee
• Update on defined benefit pension schemes
• Cyber security update from the Group IT Director
• Reviewed Group Principal Risk – Breach of Legal and
Regulatory requirements
• Presentation from the Electric Thermal Solutions Business
Finance Director
Spirax Group Annual Report 2023
141
Governance Report Audit, risk and internal control continued
Audit Committee Report continued
1. Financial Reporting
Committee role:
Actions and reviews undertaken during 2023:
Monitor the integrity of the
Group’s published financial
information and review and
challenge the significant
financial reporting issues
and judgements made in
connection with its
preparation and presentation.
• Reviewed all externally published Financial reporting, along with the 2023 Annual Report
and Accounts, prior to recommendation to the Board including fair, balanced and
understandable assessment. Detailed papers prepared by management highlighting key
issues, judgements and estimates contained within reported financials
• Detailed analysis of managements verification and internal review processes covering the
content of the external reporting releases
• External Auditor reports and progress updates in relation to Interim results review and full
year Group audit
• Detailed analysis of Going Concern and Viability reporting and underlying modelling
assumptions, including assessment of suitability of time period covered, the addition of
climate change considerations, and the scenario assumptions against the context of the
Group’s identified Principal Risks
• Pension accounting and strategy, including assessment of assumptions used to value the
material schemes
• Ongoing assessments of the appropriateness of the Group’s use of Alternative
Performance Measures (APMs) including the approval of an updated Group Policy.
Financial reporting matters and accounting judgements
The Committee is responsible for assessing whether suitable accounting policies have been adopted and whether
management has made appropriate judgements and estimates when applying these policies. During 2023, the Committee
considered and addressed the significant matters listed below in relation to the Group’s Financial Statements and disclosures.
In particular, the Committee challenged the reporting of adjusting items within the APMs relating to the Group’s
Consolidated Income Statement and the review of any potential impairment of goodwill. The Committee received regular
reports from management regarding these matters and they were the subject of detailed discussions by the Committee,
management and the External Auditor. The Committee also received reports from the External Auditor covering the work
undertaken and the conclusions reached in relation to each of these areas. As a result, the Committee reached the
conclusion that the proposed accounting treatments and resultant financial reporting were appropriate.
Revenue recognition
Issue:
In view of the profile of revenue and profit recognition in
the final quarter of the year (a period when, in some Group
companies, a higher proportion of the annual external
revenue is recognised compared to the rest of the year), the
need to focus on any new significant contracts and revenue
cut-off for certain Businesses was highlighted to ensure the
appropriate recognition of revenue for the year ended 31st
December 2023.
Pensions
Issue:
The Group operates four main defined benefit pension
schemes (three in the UK and one in the US). The aggregate
assets of the four schemes totalled £328.9 million as at
31st December 2023 while the aggregate liabilities totalled
£363.0 million resulting in a net liability of £34.1 million.
All four schemes are now closed to future accrual.
There are judgements and estimates made in selecting
appropriate assumptions in valuing the Group’s defined
benefit pension obligations, including discount rates,
mortality and inflation (see note 22 on pages 225 to 230).
These variables can have a material impact in calculating
the quantum of the defined benefit pension liability.
142
Spirax Group Annual Report 2023
How this was addressed:
The Committee monitors the adequacy of the control
environment for revenue recognition and this review is
supported by the External Auditor. In particular, the
Committee reviews adherence to the Group’s policy to
recognise revenue when performance obligations have been
fulfilled which, in the majority of cases, is at time of dispatch
or delivery to the customer. After considering the combined
evidence, the Committee was able to conclude that revenue
recognition was appropriate during 2023 and at the year end.
How this was addressed:
The Committee considered reports by management and
those from independent external specialists used to prepare
pension valuations. Management’s selection of assumptions
was challenged, and key assumptions were examined against
observable external benchmarks and market practices.
The Committee spent time during the year continuing to
closely monitor the impact on the pensions schemes and
the valuation assumptions resulting from the material market
movements in interest rates and inflation.
Based on this review (including reports from the External
Auditor) and consideration of the valuation methods applied,
the Committee is comfortable that the key assumptions and
accounting treatment are reasonable and appropriate.
Governance Report 1. Financial Reporting continued
Management override of controls
Issue:
How this was addressed:
Internal controls are the
safeguards put in place by the
Group to protect its financial
resources against external and
potential internal fraud
alongside ensuring the
accuracy of reported financial
information. Management is
responsible for ensuring the
internal controls are followed
across the Group. As such,
intervention by management
in the handling of financial
information, especially in
relation to one-off or
judgmental transactions and
making decisions contrary to
the internal control policy is a
significant, if unlikely, risk.
Oversight of the Group’s risk management and internal control environment is provided by
the Group Executive and Risk Management Committees, supported by a number of
leadership and function committee meetings that occur regularly across the year. The
effectiveness of the execution of operational processes and controls by the operating
companies is periodically reviewed by the Group functions, and action plans put in place for
any policy non-compliances identified.
The Committee discussed the mitigation of control risks, with a particular focus on the level
of management reviews taking place within the Businesses, with both management and the
Business Finance Directors in their regular Committee presentations. The Committee also
noted the high quality of response by management to any deviations from Group policies.
Regular cycles of internal and external audits by independent parties are in place to review
financial information. The audits are objective reviews on compliance with the Group’s
accounting and internal control policies.
Management has an ongoing, multi-year internal controls improvement programme in order
to further review and enhance the internal financial control environment and the Committee
receives regular updates on progress. To support the programme, the Group continued to
invest in its Internal Controls function during 2023, including the addition of further team
members as well as the launching a groupwide IT system to track control compliance and
document remediation action plans.
In addition to the internal controls improvement programme, the ERP upgrade programmes
provide a further important opportunity to standardise and automate controls and
processes across the Group which will further enhance the overall control environment.
The Committee remains satisfied with the Group’s monitoring of the effectiveness of the
risk management and internal control systems and is supportive of the Group’s continuous
improvement journey in this area.
Acquisitions – goodwill and intangible assets valuation
Issue:
How this was addressed:
There is a high level of
judgement surrounding the
valuation of goodwill and the
risk of impairment in respect
of major acquisitions.
The Committee received detailed reports from management outlining their evaluation of
goodwill and intangible assets for any potential impairments and the basis for key
assumptions and judgements used within their valuation models. The Committee focused
on the key assumptions and the associated disclosures around the valuation of goodwill
and intangible assets for the Electric Thermal Solutions Business, namely:
As detailed in Note 14 to the
Consolidated Financial
Statements on page 218 the
largest goodwill balance as
at 31st December 2023 relates
to the Electric Thermal
Solutions Business of cash
generating units (£494.7
million).
• the move to using a cash flow forecast period of five years when estimating the value in
use of the Electric Thermal Solutions Business, noting that this represents a shorter
forecast period than that used in previous years reporting
• the forecast operational performance in the business plan, in particular, sales and
earnings before interest and tax (EBIT) growth and EBIT margin forecasts as well as cash
generation assumptions
• the discount rates applied to the cashflows resulting from the business plan, specifically
the determination of the input variables used to calculate the discount rate
• the modelling outcomes when sensitivities were applied to represent reasonably possible
changes to key assumptions
The Committee concluded it was comfortable that key assumptions and associated
disclosures were reasonable and that the resulting value in use exceeded the reported
carrying values which led to no impairment being required, including when sensitivities
were applied.
Spirax Group Annual Report 2023
143
Governance Report Audit, risk and internal control continued
Audit Committee Report continued
1. Financial Reporting continued
Other significant financial reporting issues
Going Concern, Viability Statement and financial resilience
During 2023 the Committee remained focused on
monitoring the Group’s financial resilience and overall
liquidity position, especially given the debt-financed
acquisitions of Vulcanic and Durex Industries which
completed in the second half of 2022. The Committee
approved all the external debt financing activities
undertaken during the year, receives regular updates from
the Treasury Committee and noted that the Group operated
throughout 2023 comfortably within the leverage ratio
covenants contained within its external financing
arrangements.
The Group has continued its Viability Statement reporting in
line with best practice by (i) including an assessment period
of five years and (ii) providing sufficient detail around the
underlying scenario modelling undertaken to ensure an
explicit link between the scenarios and the Group’s
identified Principal Risks. Additionally, the Group has added
further narrative in 2023 which references the potential
impact on Group assets and operations resulting from a
series of climate change scenarios. This scenario-based
analysis was supported by a specialist, external
consultancy. The Committee reviewed the 2023 Going
Concern and Viability Statements and were satisfied that
these represented accurate assessments of the Company’s
position at the date of the Financial Statements. For further
detail on the Going Concern and Viability Statements and
for additional information on the financial resilience of the
Group, please refer to pages 41 to 43.
Financial disclosures including Alternative Performance
Measures (APMs)
In the year, the Committee reviewed the treatment of
specific adjusting items. These included the treatment and
presentation of costs related to:
• The right-sizing of operations within the Watson-Marlow
Business
• The impairment of software assets relating to an ERP
upgrade project in Steam Thermal Solutions
• Acquisition and disposal activity including (i) the disposal
of an associate investment in Econotherm, and (ii) the
movement in the fair value of deferred consideration
payable by Vulcanic in relation to the acquisition of EML
Manufacturing LLC in 2021
During 2023, the Group undertook certain transactions
which were significant in nature and which management
proposed be classified as adjusting items to provide all our
stakeholders with additional useful information in order to
assess the period-on-period trading performance of the
Group. In the Group’s 2023 financial reporting, the
Committee supported a change in the presentation of such
adjusting items. Historically the Group included an
adjustments column within the Consolidated Income
Statement together with an Alternative Performance
Measures (APMs) note to the accounts. For 2023 reporting,
the adjustments column and note to the accounts have
been removed and replaced with a glossary within the
Annual Report that contains full details and reconciliations
of all adjusting items and APMs. The Committee also
approved an updated Group policy covering such items
during the year.
All adjusting items were closely monitored by the
Committee with considerable time spent to understand,
review and challenge management’s classification. The
Committee also took account of the views of the External
Auditor and arrived at the conclusion that they supported
the disclosures made by management and considered the
classifications to be appropriate in each case.
The Committee continues to focus on the definitions and
usage of APMs noting the ongoing regulatory scrutiny on
such measures.
In addition, the Committee also reviewed the accounting
treatment and disclosures relating to a number of specific
transactions and situations that occurred within the year,
these included:
• The associate investment Spirax Group has made in the
Kyoto Group (Euronext ticker: KYOTO), see page 122 for
more information on this investment
• The treatment and presentation of the financial results of
the Group’s operating companies located in Argentina
144
Spirax Group Annual Report 2023
Governance Report 2. Internal controls
The Board has overall responsibility for the effectiveness of the Group’s internal controls and risk management frameworks.
Oversight of the Group’s risk management procedures and the operation of controls is undertaken by the Risk Management
Committee and the Group Executive Committee and further detail on these processes can be found on pages 98 to 105.
The Committee supports the Board and the Risk Management Committee by monitoring and assessing the effectiveness of
the Group’s internal controls processes as follows:
Committee role:
Actions and reviews undertaken during 2023:
Review the adequacy and
effectiveness of the Group’s
internal financial control
environment.
• Review of all Internal and External Audit reports
• Update on Group-wide training programmes (including mandatory courses on Health and
Safety, Anti-Bribery and Corruption and Cybersecurity)
• Annual reviews of the Group’s Tax and Treasury policies with the Group Head of Tax and
Receive reports from the Risk
Management Committee on
operational risks.
Group Treasurer attending the Committee meeting. Review by the Audit Committee Chair
of the minutes and actions of the Tax and Treasury Committee meetings that took place
during the year
Review the Group’s Tax and
Treasury policies as well as
debt financing facilities and
the approach to management
of foreign exchange risk.
• Review and approval of all new Group external debt financing facilities entered into during
the year
• Review of anticipated impacts of the incoming Pillar 2 OECD minimum tax rate legislation
• Review of annual management papers on how the Group monitors the effectiveness of
the Group’s internal control processes
• Reports from the functional leaders with responsibility for managing cybersecurity risk
• Presentations from management detailing the progress achieved on the G3 internal
controls programme
• In-depth presentations from the Group Sustainability team covering sustainability
reporting requirements, data quality, processes and frameworks
• Detailed reviews with the respective internal risk owner for two of the Group’s identified
Principal Risks
• The Finance Director of each of the Group’s three Businesses presented to the Committee.
These updates included progress reports on the programmes to upgrade their core
information systems. Progress was compared to a series of identified critical success factors
During the year both management and the Committee continued to closely monitor the ongoing proposals by the UK
Government and the Financial Reporting Council (FRC) to reform UK corporate governance and reporting. Following on from
the work undertaken during the last two years, the Group has continued to invest significant time and resources in
understanding and preparing the Group for the anticipated impact of the proposals. The Group submitted a response to the
FRC consultation and is supportive of the announcements in late 2023 and January 2024 that refine the scope of the
original proposals and provide further clarity around the implementation requirements and timeline.
The Group’s Chief Financial Officer and his finance leadership team have continued the implementation of their Group
Governance Guidelines (G3) programme which is designed to deliver a risk-based approach to improving the overall internal
financial controls within the Group. To support the Group’s Businesses to successfully embed the G3 programme, the Group
has continued to invest in its internal controls team who partner with the Group’s Businesses and provide a library of training
materials and a global online platform to track and monitor progress across the Group.
The Group currently employs a localised operating model which results in a large number of individual IT systems which
underpin business operations and the financial reporting processes. This strategy results in a disaggregated control
environment which is supported by a series of manual control processes operated locally and additional monitoring
activities at a Business and Group level. Through our control monitoring activities, opportunities to improve the control
environment are identified, these include improving the formality of control operations, including better retention of
evidence of a control’s operation sufficient for testing purposes; and limitations in certain segregation of duty, user access
and change management controls. Actions are put in place to respond to observations, which are reported to and monitored
by the Audit Committee. In addition, the ongoing multi-year internal controls improvement programme together with the ERP
upgrade programmes provide an important opportunity to standardise and automate controls and processes across the
Group which will further enhance the overall control environment by creating a more centralised and standardised operating
model, together with a more consolidated IT system landscape. The internal controls team are working alongside each of
the Group’s Businesses to support the ERP upgrade programmes to ensure that the Group effectively designs the systems
and underlying processes to embed and automate control activities. Following the FRC release of guidance relating to the
internal controls declaration effective for the December 2026 year end, we are evaluating our monitoring activities and also
the timing of the control improvement and ERP roll-out programmes.
Spirax Group Annual Report 2023
145
Governance Report Audit, risk and internal control continued
Audit Committee Report continued
2. Internal controls continued
The Group has also continued to focus on mapping its current external reporting alongside the level of assurance it currently
obtains over its external disclosures. Following on from the structured risk review of all the Group’s external disclosures,
together with a review of best market practice amongst the Group’s FTSE 100 peer group (undertaken in 2022), the Group
has identified sustainability reporting as a focus area going forward. The scope and breadth of reporting required by a range
of different regulatory bodies, alongside the lack of established frameworks, creates challenges for all market participants.
The Committee supports the Group‘s continuing investment in its Group Sustainability reporting team which will focus on
further embedding data reporting processes and delivering the assurance journey to ensure continuing compliance with
existing regulations whilst also preparing for future disclosure requirements.
More information on our risk management processes and the Key risks can be found in the Risk Management Committee
report on pages 150 to 154 and Risk Management section on pages 98 to 105.
3. Whistle-blowing
The Group’s Safecall facility, a confidential colleague whistle-blowing platform, continued to be used across the Group
throughout 2023. The facility is actively advertised at all operating companies and allows any colleague to raise concerns,
anonymously if needed, where they feel activity is being undertaken which conflicts with the Group Management Code or
Values. Calls raised are investigated by the Group General Counsel and/or the Group Head of Internal Audit with the
involvement of other senior colleagues as required.
Committee role:
Actions and reviews undertaken during 2023:
Review the adequacy and security of the whistle-blowing
arrangements that the Group has in place for colleagues.
Ensure appropriate processes are in place for the
proportionate and independent investigation of any matters
raised.
Receive reports of non-compliance with the Group’s policies
around fraud, bribery and unethical behaviour.
• The Committee reviewed summaries of calls to the Group’s
whistle-blowing helpline which have been received and
investigated, or where investigation is in progress
• Reviewed the outcome of any identified cases where Group
policies have been breached, together with details of the
actions taken by management alongside consideration of any
lessons learned
As a result of the Committee review it was satisfied that all calls received via Safecall were dealt with appropriately by
management. A limited number of breaches of the Group policies were identified during 2023. There was no material
financial loss in any of these instances and the Committee was supportive of the lessons learned during the year and the
follow-up actions taken by management to support and reinforce Group policies.
4. Risk management
Committee role:
Actions and reviews undertaken during 2023:
Review the Group’s
procedures and controls
relating to:
• Fraud
• Bribery and unethical
behaviour
• Money laundering
• Compliance with legal and
regulatory requirements
• Risk Management
Committee on operational
risk reporting and controls
• Reviewed current approach to fraud risk management and participated in follow-up to an
internal cross-function workshop
• Received reports from management detailing any identified cases of fraud and the resulting
actions being taken
• Received input from the External Auditor and from the Internal Audit function as to their
observations and findings
• Received updates from the Group Legal team on the training materials used across the Group
to educate colleagues on anti-bribery, money laundering and legal compliance. Additionally, a
deep dive into the identified Group Principal Risk covering a breach of legal and regulatory
requirements was undertaken in December 2023
• Received updates from the Group Legal team on the Group’s mandatory contract practices,
including: (i) an example of a specific online training tool developed by the Watson-Marlow
team to support its customer facing teams; and (ii) enhanced and refreshed Group
communications around sanctions compliance
146
Spirax Group Annual Report 2023
Governance Report 5. Internal Audit
Fraud
In line with the Economic Crime & Corporate Transparency Act fraud prevention requirements, the Committee monitors the
effectiveness of measures in place to prevent, detect and manage fraud. While it is not possible to completely eliminate
fraud risk from the organisation, the Committee is satisfied that measures currently in place are effective at managing and
reducing fraud risk to an acceptable level.
During the year, the existing top-down fraud risk assessment of the Group was reviewed. Improvements to fraud mitigation
measures such as further strengthening of third-party due diligence processes were undertaken.
A bottom-up fraud risk assessment exercise has commenced whereby the fraud risks and controls within 25 of the Group’s
largest operating units will be assessed, and further enhancements implemented as needed. In addition, a cross-functional
team has been established to refresh the Group’s Code of Conduct for rollout to all employees in 2024.
The Committee is cognisant that the ongoing monitoring and review of the effectiveness of the Group’s Internal Audit
function is a key responsibility which all our stakeholders look to the Committee for. During the year the Committee
undertook a number of actions in this area:
Committee role:
Actions and reviews undertaken during 2023:
Monitor and review the
effectiveness of the Internal
Audit function.
Review, assess and approve
the annual Internal Audit plan.
Review the Internal Audit
reports and monitor the key
issues arising.
• Assessed the independence and effectiveness of the Internal Audit function
• Reviewed the results of the annual self-assessment of the function in addition to noting the
completion of a number of actions which resulted from the 2022 external review
• Monitored key performance indicators of the function against pre-agreed targets
• Monitored timely completion of internal audits against the 2023 audit plan and approved any
changes to the plan
• Approved the internal audit activity plan and budget for 2024
• Reviewed reports submitted periodically by the Head of Internal Audit of activities
undertaken, key audit findings and remediation actions and status reports on completion
of agreed action plans
• Reviewed and approved the Internal Audit Charter
• Held meetings with the Group Head of Internal Audit without management present
Throughout 2023, the Committee monitored the effectiveness of Internal Audit activity and the results of audits undertaken.
This provided valuable input into the Committee’s view on the effectiveness of the Group’s risk management, control and
governance framework.
During 2023, the Internal Audit team performed a total of 35 internal audits, which were all conducted through in-person
visits. By visiting the Business sites and locations to conduct the audits it provides a valuable opportunity to build strong
relationships with the local operating companies and to gather additional insights. The activity included audits of all the key
sites within the Vulcanic and Durex Industries businesses which were acquired in 2022. The insights and identified actions
within the acquired businesses form a key pillar of the integration journey as we improve the operational and reporting
standards in order to align with the required standards of the Group.
The majority of the operating companies audited were found to have an effective control environment. Where issues were
found, remediation actions were agreed that are tracked to completion and validated before being closed. To the extent that
any Internal Audit action items become overdue, the Business Finance Directors are engaged to assist with ensuring they
are closed as soon as possible. The Committee was satisfied that throughout 2023 management devoted significant
resource to the resolution of action items. The Committee receives regular reports on closure rates and will continue to
monitor outstanding actions. During the year, progress was made in reducing open and overdue high priority items.
The Internal Audit function has continued to develop its analytics capabilities and is ensuring it has the skills to support the
Group’s ERP upgrade programmes, as well as being able to take advantage of further automation opportunities which
consistent finance IT platforms will provide. The target is for analytics to be fully embedded across the Internal Audit
process including risk assessment, scoping, fieldwork testing and assessing the effectiveness of remediation actions
implemented. The Committee is satisfied that the internal audit function has sufficient skills and resources to discharge its
responsibilities effectively.
Spirax Group Annual Report 2023
147
Governance Report Audit, risk and internal control continued
Audit Committee Report continued
6. External Audit
Committee role:
Actions and reviews undertaken during 2023:
Oversee the relationship with the Group’s
External Auditor.
Review the quality and effectiveness of the
External Audit, including approval of the
scope of the annual audit plan and
associated fees, the underlying audit
procedures and approach and the controls
designed to ensure independence and
govern the provision of non-audit services.
Make recommendations to the Board on the
tendering of the External Audit, the
appointment process, remuneration and
engagement terms of the External Auditor.
• Deloitte’s reports to the Committee covering its interim review and Full
Year audit outcome and opinion
• Recommendation to reappoint Deloitte at the 2023 AGM
• Review, challenge and approval of Deloitte’s 2023 audit plan and
associated fees
• Tracking Deloitte’s progress against audit plan journey – specific areas of
focus included data analytics usage
• Tracking performance against the agreed External Audit quality indicators
• Approval of Non-Audit Services Policy alongside processes to govern
auditor independence
• Regular dialogue with Deloitte through the year, in addition to Committee
meeting time allocated with External Auditor without management present
The Company confirms that it has complied with the provisions of the CMA‘s Statutory Audit Services for Large Companies
Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014
for the financial year under review.
External audit effectiveness and quality
A key responsibility of the Committee is overseeing the external audit process and assessing the audit quality. During the
year the Committee engaged in a number of specific actions to ensure it continues to fulfil its obligations in this area. These
included:
• Review of the Audit Committee and the External Audit: Minimum Standard: The Committee reviewed the guidance
issued by the FRC in May 2023 and completed a mapping exercise whereby all requirements were mapped against
existing Committee processes and responsibilities in order to confirm compliance.
• External evaluation of FRC’s Audit Quality Review (AQR): The Committee reviewed the FRC’s latest AQR report on audit
quality as related to Deloitte. This review was followed up with a findings discussion with Deloitte at a Committee
meeting. The Committee was satisfied with the outcome of this review.
• Tracking of performance against Audit Quality Indicators (AQIs): Following the Group’s participation in the FRC’s pilot
review project on this area in 2022 the Committee agreed a set of AQIs against which Deloitte’s External Audit would be
measured. The criteria covered a variety of factors including: the experience of the audit team; the use of technology to
automate the audit process; the level of input from technical specialists within Deloitte; and the overall communication
process with the Committee. The Committee received a detailed breakdown of performance against the agreed criteria
and was pleased to see strong performance continuing against the agreed metrics.
• Audit plan and approach: The Committee discussed Deloitte’s detailed audit plan and proposed approach and the
planned scope of the audit during the year, together with the proposed materiality and the identified significant audit risks.
The number of Group operating companies included within the scope of the audit was increased for 2023, primarily due to
the inclusion of a number of the largest Vulcanic and Durex Industries operating companies that were acquired in late
2022. Due to the increased size and scope of the Group the Committee worked with Deloitte to implement a
business-by-business structured approach to the 2023 audit. This involved Deloitte having specifically designated audit
teams and partners for each of the Group’s three Businesses, with each working closely with the central Deloitte team in
order to provide additional insight into the operations, controls and reporting within each Business.
As part of this detailed audit plan review, the Committee reviewed and approved the proposed audit fees. In reviewing the
audit fees, the Committee received a detailed breakdown of the proposed fees and was able to satisfy itself that the
agreed amount represented fair value in order to deliver the quality and scale of audit sought.
• Internal evaluation process: The Committee considers it important to gather feedback from within the Group and
specifically from the finance teams within the operating companies which interact with the various Deloitte teams as part
of the audit process. Each local finance team is asked to provide feedback on the External Audit process by scoring a
series of review questions and providing rationale for the scores given. The results are then aggregated and presented to
the Committee and Deloitte for discussion with year-on-year movements in the results tracked and detailed. The
feedback from last year led to a number of positively received changes being implemented in the audit process for 2023.
The overall results and audit experience improved year-on-year and incremental opportunities to further improve the
process have been identified and agreed with the Committee for 2024.
148
Spirax Group Annual Report 2023
Governance Report • Interaction with the Auditor: Throughout the year, the
Committee worked closely with Deloitte and was able to
gather a good insight into the overall quality of the audit
process and the performance of key individuals within the
Deloitte team. Throughout these interactions the
Committee felt that Deloitte delivered a consistently high
quality output and provided an appropriate challenge to
management’s assumptions, key judgements and
estimates whilst ensuring its audit process focused on the
key risk areas.
Andrew Bond has led the Deloitte audit relationship with
the Group for the past five years. As agreed during the
2022 tender process, Dean Cook will replace Andrew from
2024 onwards and in order to facilitate an effective
transition Dean has spent time with management and
attended a number of Committee meetings during the year.
Via the combination of the activities described above, the
Committee was able to conclude that Deloitte has provided
a high quality audit, appropriately questioned and
challenged management and ensured that the Committee
has received appropriate insight and feedback detailing the
process and results. The Committee was also pleased to
see: (i) a continuing expansion of the use of data analytics
by Deloitte within the audit process this year in order to
increase efficiency; and (ii) the continuing review and
controls assessment work being undertaken by Deloitte in
order to review and suggest improvements to each of the
Group’s Businesses as they continue on the journey to
upgrade their respective ERP systems.
Safeguarding Auditor independence and objectivity
The Committee recognises that the independence of the
External Auditor is an essential part of the audit framework
and has adopted a policy for determining whether it is
appropriate to engage the Group’s Auditor for non-audit
services. The Auditor Engagement Policy was reviewed and
updated during the year to align with the latest FRC Ethical
Standards. A copy of the Auditor Engagement Policy can be
found on the Group’s website, spiraxgroup.com/
governance-documents.
To safeguard independence and objectivity, the policy sets
out that the maximum period of an audit engagement
without an external tender process taking place is to be 10
years (calculated from the date of the first financial year
covered by the audit engagement letter), with the statutory
Audit provider to be rotated at least every 20 year. Further,
and in line with the Ethical Standard, the policy details the
non-audit services that the Auditor can undertake and
which of those services are subject to the non-audit
services cap.
On non-audit service caps and approvals, the policy states
that any expenditure with the Group’s Auditor on non-audit
fees should not exceed 70% of the average audit fees
charged in the last three-year period.
Furthermore: (i) where the fees for any individual
engagement in relation to the non-audit services are in
excess of £100,000, pre-approval is required from the
Committee; and (ii) a cumulative annual cap of £300,000 is
set in respect of non-audit services provided by the Auditor,
above which all individual engagements must be
pre-approved by the Committee.
In addition to the Group’s policy, the Auditor performs its
own independence and compliance checks, prior to
accepting any engagement, to ensure that all non-audit
work is compliant with the FRC’s Ethical Standard in force and
that there is no conflict of interest.
During the year, the Group spent £0.2 million on non-audit
services provided by Deloitte LLP, which included work
undertaken on the interim review. These non-audit fees
equate to 9% of the average Group audit fees charged over
the past three years. Further details can be found in Note 6
on page 211.
Ensuring a fair, balanced and understandable
Annual Report
The Board is required to provide its opinion that it considers
the Annual Report and Accounts, as a whole, to be fair,
balanced and understandable and therefore provides the
required information for shareholders to assess the Group’s
position, performance, business model and strategy.
During 2023, the Committee considered many components
of business performance to ensure it has a full
understanding of the operations of the Group. Key matters
considered by the Committee include:
• Reviewing, understanding and supporting the key
judgements taken and estimates made
• Risk areas set out in the Risk Management
Committee Report
• Ensuring an appropriate balance of GAAP and non-GAAP
financial measures and disclosures
• Receipt of regular strategy reports from the Group Chief
Executive and operational reports from the Business
Managing Directors
• Briefing from the Group Head of Communications on key
reporting themes
• Reviews of the budget and operational plan alongside the
financial performance
• Recognising the internal co-ordination and review of the
Group-wide input into the Annual Report which runs
alongside the formal audit process undertaken by the
External Auditor
Through all the above, alongside its monitoring of the
effectiveness of the Company’s controls, Internal Audit and
risk management, the Committee maintains a good
understanding of business performance, key areas of
judgement and decision making processes within the Group.
As a result, the Committee advised the Board that it
considers the Group’s Annual Report to be fair, balanced
and understandable.
Kevin Thompson
Chair of Audit Committee
6th March 2024
Further reading
Resilience, Going Concern and Viability Statements on pages 41
to 43
Spirax Group Annual Report 2023
149
Governance Report Governance Report
Audit, risk and internal control
Risk Management Committee Report
Effective risk management remains fundamental
to the resilience of our Group.”
Nimesh Patel
Chair of Risk Management Committee
Committee roles and responsibilities
The purpose of the Committee is to oversee the management
and control of significant risks affecting the Group. The
Committee ensures that the Group has robust risk management
policies and procedures in place, covering all key areas of risk,
such as governance, sanctions and embargoes, crisis
management, human rights, business continuity and
business management.
The Committee’s responsibilities include:
• Using top-down and bottom-up reviews to understand the
risks facing the Group, including all workforce-related risks
• Determining the Group’s appetite for risk
• Assessing the velocity of each risk
• Monitoring any emerging risks on the horizon
• Accepting and managing within the Businesses those risks
which our colleagues have the skills and expertise to
understand and leverage
• Identifying appropriate risk mitigation techniques
and countermeasures
Members
Our Risk Management Committee is comprised of
the Group Executive Committee and Dan Harvey
(Head of Internal Audit). Their attendance at the
meetings during 2023 was as follows:
Membership
Nicholas Anderson (Chair until 16th January 2024)
Nimesh Patel (Chair from 16th January 2024)
Jim Devine
Dan Harvey (Head of Internal Audit)
Andrew Mines
Armando Pazos
Sarah Peers
Maurizio Preziosa
Andy Robson
Maria Wilson
4/4 *
4/4
4/4
3/4**
4/4
4/4
3/4**
4/4
4/4
3/3 ***
* Nicholas Anderson stepped down in January 2024
** Absent due to business commitments with contribution
provided outside of the meeting
*** Maria Wilson joined the Committee with effect from 1st
September 2023
How the Committee spent its time %
59%
29%
12%
Risk register review
Risk management and controls (including key risk deep dive)
Results review and reporting
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Spirax Group Annual Report 2023
Governance Report Key activities
The Committee met four times in 2023, details of
attendance at meetings can be found on page 115.
A summary of the Committee’s activities throughout the
year is set out below:
August
• Given the high inflationary environment and evolving
geopolitical events, an ad hoc assessment of Principal Risks
was undertaken with the result that the risks were consistent
during the first half of 2023 as compared to last year
September
• The results from the bottom-up risk review were considered
• Ineffective IT Systems was added as a risk to the Risk Register
• Deep dive on ‘Loss of Manufacturing output at any Group
Factory’ Risk
• Pursuant to the Enterprise Risk Management review, in-scope
supply sites (factories) were revised and a blueprint agreed for
the application of the framework to other Principal Risks in 2024
and beyond
October
• All operational risks were scored, including for Risk Velocity
and Risk Appetite
• Inability to Identify and Respond to Changes in Customer
Needs – (Digital/Non-Digital) identified and agreed as a
separate subset of the existing risk of Inability to Identify and
Respond to Changes in Customer Needs
• Certain risks resolved to be rescored according to the scoring
criteria before December 2023 meeting
December
• Final approval of 2023 Risk Register and Principal Risks
• Risk Appetite and Risk Velocity ratings validated for all risks
Chair’s review of 2023
Summary of key focus areas
The deteriorating macroeconomic climate in 2023 has
warranted very close oversight of the risks facing our Group.
A key addition has been made to our Risk Register in the
form of the risk Ineffective IT Systems. The Committee
determined that the risk could have a material impact on our
Group given the greater reliance from our Businesses and
functions on our IT Systems. Whilst the risk has historically
been low, increasingly complex solutions sought by our
customers mean we could be faced with limited scalability
and a competitive disadvantage in the absence of
significant investments. In recognition of this, the Group has
embarked on a medium to long-term programme of
substantial investment in its IT and data infrastructure over
the next five to seven years and has also bolstered its
governance in the area to support the roll out of these major
transformational projects.
Another key assessment in this year’s Committee
deliberations has been the risk of failure to meet our
customers’ Digital requirements. A shift towards service
business models is evolving in our relevant markets.
Notably, however, these models are perceived as
complementary to existing products and services as
opposed to new revenue streams. We will proceed to make
significant investments to ensure speed and clarity of
execution in our prioritised areas of impact. Emerging
technologies such as Generative AI are steeply accelerating
the speed of change in this area. We therefore continue to
build our capabilities including delivery of a vision-led AI
Strategy and a robust Data Strategy as part of the roll out of
our Group Digital Strategy that focuses on Digital for
Customers and Digital for Colleagues.
The world order in 2023 spelled continued uncertainty;
together with the war in Ukraine, the conflict in Palestine
presents new global challenges from a political and
economic perspective. As a consequence, we have
undertaken scenario planning exercises to deep dive into
specific areas of risk. In light of the new geopolitical and
macroeconomic plans of the current political leadership in
China, the Committee undertook an exercise to reassess
the Group strategy in this territory. Following over 40 years
of high economic growth which has positioned China as the
world’s second largest economy, China is seeking to
re-evaluate its position on geopolitical affairs and modify
foreign policy accordingly. We have therefore realigned our
business strategy as an anticipatory response to any such
geopolitical shifts.
In 2022, with the support of external consultants, we
undertook an Enterprise Risk Management review to
understand the robustness of our risk process. A number of
recommendations were drawn from the report and in 2023,
we put the actions on a secure footing including
implementing more granular Risk Appetite definitions to
clarify the level of risk which we deem acceptable. We also
introduced Key Risk Indicator reporting so that the risk
position can be better assessed, whilst agreeing for
mitigation actions to be set so that they are tracked to
completion of the action.
Anti-Bribery and Corruption (ABC)
The Group has continued to reinforce the message of zero
tolerance for bribery and corruption within its Businesses.
Our ABC training, which is hosted by the Steam Thermal
Solutions (formerly Steam Specialties) Academy as part of
the Group Essentials training module is available in 16 key
languages and, as at 31st December 2023, around 7,000
colleagues (including Directors) worldwide have now taken
part in the training (2022: 6,300).
The Group uses an independent, third-party whistle-blowing
facility to enable colleagues to anonymously report any
suspected unethical, illegal or otherwise concerning conduct.
Spirax Group Annual Report 2023
151
Governance Report Audit, risk and internal control continued
Risk Management Committee Report continued
Chair’s review of 2023 continued
Anti-Bribery and Corruption (ABC) continued
In line with our Gifts, Entertainment and Hospitality Policy,
we also maintain an online Gifts Register, where colleagues
are expected to record gifts, to ensure our conduct is in
keeping with the highest ethical expectations and always
within the law.
Further updates on whistle-blowing and ABC can be found
in our Sustainability Report on page 69.
Modern Slavery Statement
The Group’s Modern Slavery Statement 2023 reflects the
Group’s Values and the interplay between those Values and
our commitment to the mission behind the UK Modern
Slavery Act. It explains how we operate to the highest
ethical standards across our Group.
We respect and protect human rights and will not tolerate
modern slavery or human trafficking in any of our
operations, including through our supply chain. The
Statement can be found on the Group’s website, at
spiraxgroup.com/corporate-governance.
Identifying emerging and Principal Risks
We have a robust risk management process in place through
which we identify, evaluate and manage the Principal Risks
and emerging risks that could impact the Group’s
performance.
During 2023, we reviewed the Group’s exposure to risk
using a bottom-up approach, where the Committee sought
views of the Group’s operating companies on the risks that
they considered may affect their activities to ensure new or
emerging risks are not missed. Following this process, the
Committee reviewed and confirmed the robustness of the
countermeasures that Group operating companies have in
place to mitigate the Principal Risks in the Group Risk
Register, whilst adding Ineffective IT Systems as a new risk
to the Risk Register. In addition, we continued to closely
monitor certain changing emerging risks. An example of this
is our inability to maintain the speed of digital advancements
to maintain our competitive advantage. This was reflected
through the creation of a new subset risk of Inability to
Identify and Respond to Changes in Customer Needs –
Digital so that we can monitor the risk independently of the
associated broader non-digital risk.
Our Principal Risks and the results of the 2023 review are
set out in the Strategic Report on pages 101 to 105.
Monitoring effectiveness
(i) Risk management systems
The Committee is responsible for reporting to the Board the
risks facing the Group and the mitigation measures for those
risks. To fulfil that responsibility, the Committee oversees
the Group’s risk management processes and procedures,
with support from the Audit Committee, through the Internal
Audit function, that monitors Group operating companies’
compliance with those processes and procedures.
The Committee is also charged with the ongoing monitoring
of sufficient and effective mitigation plans for relevant risks
at each Business together with all the operating companies
152
Spirax Group Annual Report 2023
in each of those three Businesses. Each operating company
is required to undertake a formal review, at least once a year,
of the risks which impact, or have the potential to impact, its
business. This takes the form of a top-down or bottom-up
review and includes all risks related to that operating
company’s workforce. The reviews are consolidated into
Group-wide risk reports which are maintained and reviewed
by the Committee on a regular basis. Additionally, the risk
management processes are monitored on an ongoing basis
via internal and external audits of Group operating companies.
Senior managers have full accountability for risk
management within their businesses.
The governance structure provides three lines of defence in
the Group’s risk management, as illustrated below.
First line of defence
Each Business is responsible for the identification,
control and management of its own risks
Second line of defence
The Risk Management Committee, with the Audit
Committee, ensures that the risk and compliance
framework is effective, to facilitate the monitoring of risk
management with ongoing challenge and review of the
risk profile in the business
Third line of defence
Internal audits provide independent testing and
verification of compliance with policies and procedures
and monitoring of follow-up actions where required
(ii) Internal control framework
The Group’s internal controls framework is structured
as follows:
Identify/prioritise risks
Set risk appetite
Set operating principles
Produce and maintain detailed policies/procedures
Validate and test compliance with policies
Report on policy compliance
Manage exceptions
Governance Report Oversight of the Group’s risk management frameworks and
operation of controls is undertaken by the Risk Management
and Group Executive Committees.
The Risk Management Committee regularly reviews the
Group’s Principal Risks, including emerging risks and defines
appropriate risk appetite. The Group Executive Committee is
responsible for the operation of controls to mitigate both the
Principal Risks and other operational risks. The Board is
actively involved in reviewing all risks. The Audit Committee
also undertakes ‘deep dives’ into the Principal Risk areas.
Underpinning the Group’s control environment is our culture
and the ‘tone at the top’ of the organisation, which sets the
principles under which all Group business is conducted.
These principles are captured in the six Values of the Group
that have been communicated to all colleagues.
These principles are also documented and reinforced
through the Group Management Code and through annual
mandatory training via the online Group Essentials
programme. Colleague engagement surveys are also
undertaken to validate organisational alignment to our
Values and in 2023, a Values-based awards programme, the
Spirit Awards, held its first awards ceremony which was
widely acclaimed internally as a resounding success.
The Group’s documented policies and procedures, which
are periodically reviewed and refreshed, set out our clear
expectations of operating companies for the operation of
controls. This includes the Group’s Delegation of Authorities
that has been approved by the Board and cascaded to our
Business Executive teams and their respective
operating companies.
Reviews over the effectiveness of the controls environment
are performed through an annual Risk and Control Self-
Assessment process and reviews of operating companies’
activities are undertaken by Group functions, including
Internal Audit. Where appropriate, such as when reviewing
specialist functions, independent reviews are sought from
third parties and various regulatory and certification audits
are also undertaken across the Group each year. Findings
identified from these processes and reviews give rise to
documented action items, which are tracked to completion.
Oversight of the financial and operational performance of
our operating companies is provided at Business and Group
levels and includes detailed quarterly financial reviews,
reviews of monthly management accounts and weekly flash
reporting. Key business decisions are approved by the
Group Executive Committee, which meets monthly to review
financial performance and receives reports on activity to
manage our Principal Risks. Senior leaders and the Board
visit Group operations, and regional and Business leaders
also present directly to the Board. Various Business and
Functional conferences are held during the year to engage
our global teams and help communicate Group
expectations. This includes a Group Leadership Conference
which brings together all the senior leadership teams of the
three Businesses, together with leaders of Group functions.
Safecall, our established, independent whistle-blowing
facility is managed by the Group General Counsel and is
advertised at all operating company sites and was recently
reinforced through a new Group-wide awareness campaign.
Safecall helps us ensure that we are always acting with
integrity and working in a way that is fair and honest and
always doing the right thing. If colleagues are concerned
about wrongful conduct at work, they can use Safecall to
report concerns confidentially and anonymously if they
become aware of any activity that is inconsistent with our
principles. Concerns are investigated by the Group General
Counsel or another senior manager as appropriate.
(iii) Internal audit
The Group’s standard policy regarding internal auditing is
that each operating company is audited at least once every
five years (most more frequently). Operating companies
located in higher risk territories are audited more frequently,
and businesses acquired by the Group are subject to
internal audit within six months of acquisition.
The internal audit system is a crucial part of the risk
management process. Internal audits are conducted by our
Internal Audit team led by our Head of Internal Audit.
Internal audit reports are made to the Audit Committee and
the Board as a whole. The Audit Committee has ensured
compliance with centrally documented control procedures
on such matters as capital expenditure, information and
technology security and legal and regulatory compliance. The
Audit Committee conducts ‘deep dives’ into Principal Risks.
Risk Appetite Statement
Risk is an inherent part of business and in order to achieve
our business aims, we must accept certain risks. We seek to
implement a balanced approach to risk, ensuring that our
resources are protected while still pursuing opportunities to
accelerate and deliver growth.
The decision to take opportunity-based risks should, to the
greatest extent possible, be deliberate and calculated.
• We aim to confirm that the level of risk is commensurate
with the strategic and economic benefits the risk
might bring
• We evaluate our ability to control the risk or mitigate its
effects, should that risk materialise
• We always assess the potential ethical considerations
arising from knowingly accepting some level of risk
An informed and well-considered process is crucial to any
decision to accept risk. The Committee has undertaken a
thorough evaluation process to determine an appropriate
Risk Appetite and Risk Velocity rating for each Principal Risk.
These are set out in detail in the Risk management section
of the Strategic Report which starts on page 98. The
Committee has also acted on the findings of the Enterprise
Risk Management Review including a recommendation of
granularising the definition of Risk Appetite to clarify the
level of risk that is acceptable to the Group.
The Group has a very low appetite for risks that could lead
to violations of health, safety and environmental legislation,
breaches of legal and regulatory requirements and climate
change that might affect its operations.
Spirax Group Annual Report 2023
153
Governance Report Audit, risk and internal control continued
Risk Management Committee Report continued
Focus for 2024
• Optimise and consolidate our portfolio of digital
products and talent pool and execute against fewer
but mission-critical priorities
• Continued implementation of the recommendation
arising from the Enterprise Risk Management review,
including adopting the blueprint of recommendations
agreed and implemented in 2023 to all Principal Risks
• Undertake a top-down risk assessment exercise
• Annual review of the Risk Register
• Undertake a deep dive assessment of a designated
Principal Risk
• Continue to assess and evaluate the impact of
climate change in light of data collected and the
corresponding risks and benefits to our Group
• Continue acceleration of the implementation of our
net zero roadmap
Further reading
Risk management and Principal Risks see pages 98 to 105
Risk Appetite Statement continued
In contrast, the Group has a high-risk appetite in relation to
economic and political instability. With decades of experience
in successfully managing operations in volatile markets, we
have the control procedures in place to handle the challenges
that come with those risks and we appreciate that without
taking risks in new, sometimes unstable, territories we would
miss out on valuable opportunities for growth.
As an organisation we are risk aware, but not risk averse.
We continually monitor and assess the risks facing the Group
and evaluate our ability to control them and mitigate their
effects. Focusing on our strategic objectives, we evaluate
our Risk Appetite and decisions to accept risk in a way that
will ensure the ongoing financial health of the Group.
Board and Audit Committee oversight
The Board has overall responsibility for the effectiveness of
the Group’s internal controls and risk management
frameworks. Oversight of the Group’s risk management
procedures and the operation of controls is undertaken by
the Risk Management Committee and the Group Executive
Committee. Further details on how the Board and Audit
Committee manage this oversight can be found in the Audit
Committee Report on pages 138 to 149.
Changes to the Committee
Following the retirement of Nick Anderson in January 2024,
Nimesh Patel took over as Chair of the Risk Management
Committee. Once the new Group Chief Financial Officer
(CFO) has joined they will also be a member of the
Committee. In the meantime Phil Scott as Interim CFO will
sit on the Committee.
Viability Statement
In accordance with provision 31 of the UK Corporate
Governance Code 2018, the Board has assessed the
viability of the Group, taking into account the Group’s
current financial position, business strategy, the Board’s risk
appetite and the potential impacts of the Group’s Principal
Risks. We set out the eight Principal Risks we have
identified, along with our mitigation measures, in our Risk
Management section of the Strategic Report which begins
on page 98.
Based on this assessment, the Board has confirmed that it
has a reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they fall
due over the five-year period to 31st December 2028.
The Viability Statement is set out in full in our Financial
review on pages 41 to 43.
Nimesh Patel
Chair of Risk Management Committee
6th March 2024
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Spirax Group Annual Report 2023
Governance Report Remuneration
Remuneration Committee Report
The Committee is pleased the remuneration framework
has worked as expected, acting in shareholders’ best
interests by providing appropriate flexibility to support
Board changes while ensuring pay outcomes reflect
business performance.”
Jane Kingston
Chair of Remuneration Committee
Members
Jane Kingston (Chair)
Angela Archon
Richard Gillingwater
Kevin Thompson
How the Committee spent its time %
35%
20%
10%
10%
15%
10%
Board and GEC pay
Bonus achievements and target setting
PSP achievement and target setting
Remuneration Policy and market updates
Annual Report
Gender pay gap and wider workforce pay
Committee role and responsibilities
The main role of the Committee is to determine
Executive remuneration policies, how they are
applied and set targets for the short and long-term
incentive schemes. It also monitors compliance with
the presiding Remuneration Policy. The Committee
determines the philosophy, principles and policy of
Executive and senior manager remuneration having
regard to the latest legislation, corporate
governance, best practice and the Financial Conduct
Authority (FCA) Listing Rules.
The Committee takes account of wider colleague
remuneration frameworks, related policies and the
alignment of incentives and rewards with our Group
culture.
Key activities undertaken
The Remuneration Committee formally met six times in 2023;
details of attendance can be found on page 115. A summary of
the Committee’s activities throughout the year is set out below:
February and March
• Shareholder engagement letter and consultation update
• Finalisation of 2023 Remuneration Policy
• Approval of Annual Incentive Plan (AIP) – 2022 outcomes and 2023
targets
• Approval of 2023 personal strategic objectives
• Approval of Performance Share Plan (PSP) – 2020 outcome and
2023 targets
• Approval of 2023 PSP rules and AGM circular to shareholders
• Review of 2022 gender pay gap and Group Chief Executive pay ratio
• Review of wider colleague pay and real living wage rates (UK)
June
• Review of Group Executive Committee remuneration (GEC)
arrangements
August
• Approval of Group Chief Executive retirement arrangements
• Approval of Group CEO successor remuneration arrangements
• Approval of Interim Chief Financial Officer (CFO) remuneration
arrangements
November and December
• Approval of CFO remuneration arrangements
• External market update
• Internal pay landscape update
• Approval of 2024 salary proposals for GEC members
• Approval of 2024 Board Chair fee level
Spirax Group Annual Report 2023
155
Governance Report Remuneration continued
Remuneration Committee Report continued
Remuneration principles
Our remuneration principles are to maintain a competitive remuneration package that promotes the long-term success of
the Group, avoids excessive or inappropriate risk-taking and aligns management’s interests with those of shareholders.
Below is how remuneration is aligned with the principles of the Code.
Clarity
Predictability
Simplicity
Our remuneration framework is structured to
support the financial and strategic
objectives of the Group, aligning the
interests of our Executive Directors with
those of our shareholders. We are
committed to transparent communication
with all our stakeholders, including our
shareholders.
Risk
Our incentives are structured to align with
the Group’s risk management framework.
The AIP and PSP also incorporate malus and
clawback provisions, and there is
overarching Committee discretion to adjust
formulaic outcomes in certain
circumstances.
The long-term PSP has a range of reward
and performance outcomes to align with our
business model and strategy.
Proportionality
We operate a simple but effective
remuneration framework which is applied on
a consistent basis for all colleagues. The AIP
rewards performance against key
performance indicators, while the PSP
provides long-term sustainable alignment
with our shareholders. There is clear line of
sight for management and shareholders.
Alignment to culture
There is clear alignment between the
performance of the Group, the business
strategy, and the reward paid to Executive
Directors. We endeavour to ensure that our
target total compensation levels are set
competitively compared to other companies
of similar size and complexity to ensure we
can attract and retain the executives needed
to deliver the business strategy.
When considering performance, the
Committee takes account of Group Values,
strategies and the views of wider
stakeholders including shareholders and
colleagues.
Having no release of PSP awards until five
years from the date of award creates
long-term alignment, as do our in- and
post-employment shareholding requirements.
Introduction
On behalf of the Board, I am pleased to present the 2023
Directors’ Remuneration Report for the year ended
31st December 2023.
The Remuneration Report provides a full overview of the
structure and scale of our remuneration framework, the
decisions made by the Committee as a result of business
performance this year and the intended arrangements for
2024, including the appointment of Nimesh Patel as Group
Chief Executive Officer (Group CEO) following Nick
Anderson’s retirement announcement. In addition, the
report this year also provides greater detail on the alignment
of the remuneration framework with the business strategy.
During the year the Committee was pleased to receive
overwhelming 91% shareholder support for the 2023
Remuneration Policy, together with 96% support for the
Annual Report on Remuneration 2022.
Board changes
Nicholas Anderson – retirement
On 8th August, we announced that after a successful 10
years in role, Nicholas (Nick) Anderson would be retiring as
Group Chief Executive (CEO) on 16th January 2024. Nick
will cease employment with the Company on 31st March
2024, providing any necessary support to Nimesh Patel in
his new role until this date.
I would like to take this opportunity to extend my personal
thanks to Nick for his transformative leadership of the
business and his clear commitment to making a positive
difference to our colleagues and customers, the
communities in which we operate and the impact we have
on the environment.
Under Nick’s leadership the financial performance of the
Group meaningfully improved. In addition, Nick leaves the
Group with firmly embedded sustainability strategies and
inclusion and equity programmes.
As we reported at the time of announcement, Nick’s
retirement arrangements are aligned with the terms
provided within the Remuneration Policy. I am pleased the
exit provisions within the Policy provide for appropriate
recognition of Nick’s outstanding service whilst also
ensuring the interests of both shareholders and Executives
continue to be aligned. Nick has been awarded ‘good leaver‘
treatment under the Annual Incentive Plan (AIP) and
Performance Share Plan (PSP). This means Nick is eligible to
receive a payment under the AIP for the 2023 performance
year and will receive pro-rated shares under his existing
PSP grants. The payments under both the AIP and PSP will
be made at the normal time to the extent the respective
performance conditions are met. As per our Policy, the
two-year post-vesting holding periods for PSP awards will
continue to apply as will the post-leaving shareholding
requirements.
Nimesh Patel – appointment to Group CEO
As a result of robust succession planning, we were
delighted to announce in August that Nimesh Patel, our
Chief Financial Officer (CFO), would succeed Nick Anderson
as Group Chief Executive Officer on 16th January.
Upon appointment, Nimesh received an annual salary of
£720,000 and is eligible to participate in the AIP and PSP on
the same basis as the previous CEO, being 150% and 200%
of salary respectively as outlined in our Remuneration
Policy. Nimesh will continue to be entitled to pension
arrangements on the same terms as all UK colleagues.
In setting Nimesh’s initial salary level, the Committee
carefully considered a number of factors, including the
experience of the individual, the market level for this role
and the salary of the previous incumbent. As was
announced in August, the Committee determined it would
be appropriate to set Nimesh’s salary below that of the
experienced retiring CEO with a clear intention to provide
phased increases in base salary to the market level within
two years of appointment (i.e. £750,000 plus annual
156
Spirax Group Annual Report 2023
Governance Report Executive Director salary increases) subject to personal and
business performance. In the short term, this is likely to
result in salary increases above those provided to the rest
of the workforce. In line with the Company’s approach of
ensuring open and transparent dialogue with shareholders,
any salary increases approved by the Remuneration
Committee will be clearly reported and explained in the
relevant Directors’ Remuneration Report.
The business worked hard to take steps to mitigate these
external influences and the adverse impact of lower sales
volumes on profitability. Investments in future growth
through the development of new digitally-enabled products
and services were balanced against overhead containment
and appropriately right-sizing manufacturing capacity;
business-readiness for a recovery in volumes in 2024 was
maintained.
Louisa Burdett – appointment to CFO
In December we were delighted to announce the
appointment of Louisa Burdett as Chief Financial Officer. We
were pleased to secure Louisa’s employment under our
normal pay framework for Executive Directors; full
recruitment details are detailed on page 169 of this report.
All payments to be made are within our shareholder-
approved Recruitment Policy detailed on page 176.
Context of business performance
As referenced earlier in this Annual Report, 2023 presented
a number of macroeconomic challenges for the Group
which worsened throughout the year. The continued
destocking by customers in the Semicon and Biopharm
sectors impacted demand in ETS and Watson-Marlow
respectively, while a weaker Global IP, particularly in the
second half of the year, impacted organic sales growth for
STS. These factors adversely impacted Group financial
performance.
Strategic alignment of pay
As demonstrated on page 34, and referenced throughout
this Remuneration Report, there is a strong alignment
between Spirax Group’s key performance indicators and the
measures and targets of Executive Directors’ incentive
schemes; this is shown in the diagram below.
This alignment ensures a clear linkage between business
performance and pay outcomes, supporting the
Committee’s commitment to designing pay arrangements
which drive long-term sustainable growth for the benefit of
our shareholders.
As described later, payments under both the AIP and PSP
were impacted by the difficult trading environment
summarised above.
The Committee will continue to review thoroughly the pay
structures and incentive arrangements for Executive
Directors to ensure continued strong alignment between the
delivery of business performance and associated
remuneration arrangements.
AIP
PSP
Group KPI
(see page 34)
1 Organic revenue growth
2 Adjusted operating profit
3 Adjusted operating profit margin
4 Adjusted earnings per share
5 Cash generation
6 Health and safety
7 Group greenhouse gas emissions
2023 performance – key strategic highlights
Annual Incentive Plan
Performance Share Plan
Annual Incentive Plan
Group adjusted operating profit
Earnings Per Share Growth
£349.1m
20.5%
Cash generation
£281.7m
(2022: £370.9m for AIP purposes)
(2020 – 2022: +40.3%)
(2022: £206.3m for AIP purposes)
Group adjusted operating profit growth outturn
for the year of £349.1m was below the Threshold
target of £394.3m required for payment under
the profit element of the 2023 Annual Incentive
Plan. Consequently, no bonus payment was made
in respect of adjusted operating profit.
Earnings per share grew over the three-year
performance period by 20.5% for PSP
measurement purposes. As this was above the
Threshold performance requirement set, 31.5% of
the EPS element in the 2021 PSP will vest.
The cash generation element of the 2023 Annual
Incentive Plan was below the Threshold target
required to begin payments under this element of
the Annual Incentive Plan. No bonus payment
was made in respect of cash generation for 2023.
Spirax Group Annual Report 2023
157
Governance Report Remuneration continued
Remuneration Committee Report continued
Single figure table and incentive outcomes
Our Remuneration Policy is designed to ensure that a
percentage of Executive Director pay is based on the
achievement of demanding performance targets and is
therefore at risk of not being paid. Performance targets are
designed to be sufficiently stretching while still achievable;
maximum payments are only possible for outstanding
outperformance of financial and strategic plans. The
Group’s pay structures are deliberately designed to motivate
Directors to focus on overall Group performance while
allowing for modest payments for individual performance.
During the year, the business delivered lower than
anticipated financial performance. As a consequence, and
as shown in the single figure table on page 162, total
remuneration for Executive Directors is lower than last year.
This is due to lower achievement against both one-year and
three-year performance targets in the Annual Incentive Plan
and Performance Share Plan respectively.
Annual Incentive Plan outcomes in 2023
Financial
Non-financial
Group adjusted
operating profit
Group cash
generation
Personal strategic
objectives
70%
0%
0%
20%
0%
10% achieved
0%
10% achieved
10%
10%
10%
% of AIP
CEO
CFO
2021 Performance Share Plan (PSP)
As shown in the chart below, as a result of below median
relative TSR performance over the three-year performance
period to 31st December 2023, no part of the TSR element
of the 2021 PSP award will vest in March 2024. Achievement
against the EPS element was above the threshold required
for this part of the award to vest, resulting in a total of 18.9%
vesting of the shares granted in 2021.
Single figure remuneration 2023
N.J. Anderson
N.B. Patel
0
200
400
600
800
1,000
1,200
TSR
Total Remuneration (£000)
Fixed pay
AIP
PSP
31.5%
EPS
EPS
Maximum
Actual
TSR
Maximum
Actual
Outturn
Maximum
Actual
60%
31.5%
40%
0.0%
100%
18.9%
Earnings Per Share (EPS)
Relative Total Shareholder Return (TSR)
Application of discretion
In determining the outcome of proposed payments under
the AIP and PSP, the Committee carefully considered the
achievement of financial and non-financial targets against
each performance measure, the overall performance of the
business during the year and the wider macroeconomic
environment as well as the approach being taken for other
colleagues. The Committee made a robust and full
assessment of these factors in assessing both the incentive
outcomes and the level of total remuneration received by
each Executive Director for 2023, as illustrated on this page.
As in previous years, during 2023 the Committee did not
apply any discretion to the variable pay outcomes of the AIP
or PSP. The Committee agreed that the final vesting of the
PSP was reflective of the last three years of performance
and that the Policy operated as intended.
Annual Incentive Plan (AIP) payment 2023
Executive Director bonus payments are based primarily on
stretching Group financial performance targets which
account for 90% of maximum AIP payments (70% Group
adjusted operating profit and 20% Group cash generation).
The required level of achievement for payment under the
operating profit element was not achieved for 2023. Cash
generation targets were missed, reflecting performance
lower than expected against 2023 plans, driven largely by
the challenging trading conditions and consequent decline
in sales and profit. That said, strong progress has been
made against the personal strategic objectives set by the
Committee at the start of the year resulting in payment of
10% of salary for each Executive Director. Many of these
objectives relate to longer term initiatives which are
unrelated to the annual profit and cash performance of the
business.
The Committee is satisfied that the personal strategic
objectives set at the start of the year were sufficiently
stretching and that payments reflect the overall shareholder
experience over the year.
158
Spirax Group Annual Report 2023
Governance Report Stakeholder engagement (with colleagues
and shareholders)
We have a well-established record of active and thoughtful
engagement with our key shareholders on the issue of
executive pay. In recent years, Jamie Pike and I have spoken
extensively with a number of our key shareholders ahead
of the rebasing of our CEO base salary and our 2023
Remuneration Policy renewal. In building these open and
transparent dialogues with shareholders, the Committee will
actively engage with shareholders and shareholder
representative bodies, seeking views which are openly
discussed and considered when making any decisions about
changes to the Remuneration Policy for Executive Directors.
As there are no significant changes to the pay framework
for 2024, there have been no issues to discuss with
shareholders since the AGM in May 2023. I outlined in our
2022 Annual Report some of the advice provided by our
shareholders during earlier consultation sessions and I
remain committed to discussing with our shareholders in
advance of making any changes to the Executive Director
remuneration package and clearly explaining the
Committee’s decisions.
Wider colleague engagement
We welcome feedback from colleagues in one-to-one
performance reviews, in Works Council meetings in
countries where they operate as a collective voice, in
engagement surveys, through line manager dialogue and up
through the HR function to the Group Executive Committee
and Remuneration Committee as part of our open culture.
The Group HR Director provides updates to the Committee
as appropriate on pay and people-related issues during the
year to ensure we have visibility of the things which really
matter to our colleagues. During 2023, the Committee
received regular updates relating to the global pay
arrangements of colleagues across the business to give the
additional context needed to ensure Executive Director and
senior leader pay arrangements are equitable across the
Group. These included global salary review proposals for
2024, the alignment of UK colleague salaries against the
Real Living Wage and the regional harmonisation of
colleague benefits in various locations.
In addition, in my role as Committee Chair, I welcome the
opportunity to speak with and receive direct feedback from
colleagues from across the business via colleague focus
group sessions. Colleagues taking part in these focus
groups are drawn from different businesses, geographies,
functions and job roles. During these sessions we typically
discuss a wide variety of matters, including how our
Executive Directors and senior leaders are recognised and
rewarded and how the Board and Committee operates as
well as the wider global frameworks on pay and benefits.
Sessions held during the year had a particular focus on the
Board changes outlined earlier in this report and colleagues
told us engaging with them on executive remuneration was
valued. Colleagues were keen to understand how the
Committee ensures Executive Director remuneration is fair
and appropriate for these roles, taking into account a variety
of factors including external market data and pay levels for
other colleagues across the Group. Colleagues were
reassured to understand that benchmarking is only one of
many factors considered, with particular attention paid to
internal parity. Other discussions comprised the visibility of
commercially sensitive bonus targets and the balance
between financial and individual performance within bonus
schemes.
Wider colleague pay arrangements
The Committee monitors and reviews the effectiveness of
the Executive Directors’ reward framework and its alignment
with policies in the wider business to ensure the
appropriateness of senior pay arrangements in this broader
context. We have continued to consider the global cost-of-
living challenges for colleagues in our discussions. As part
of our approach to setting country-specific percentage
increases, we were mindful of both forecast salary inflation
data and the projected Consumer Price Index in each
country together with business affordability in the
continuing period of trading uncertainty and projected slight
decline in the global macroceconomic outlook. As a
consequence, the wider colleague pay review for 2023 in
the UK was 7.1%.
Spirax Group Annual Report 2023
159
Governance Report Remuneration continued
Remuneration Committee Report continued
Pay arrangements for 2024
The average pay increase in 2024 for UK colleagues,
including GEC members and other senior leaders, was 3.1%.
As a consequence of the Board changes described earlier in
this report, there were no annual pay review increases for
the Executive Directors effective from 1st January 2024.
Salaries for the newly appointed Group CEO and CFO were
set in 2023 inclusive of 2024 pay increases; these take
effect upon their appointments in January and July 2024
respectively.
For the plc Chair, the fee has been increased by 13% to
£350,000, reflecting a more appropriate position against
benchmark data and time commitments for comparable
companies. This fee became effective from 1st January
2024.
The Committee reviews each year the overall pay structures
and performance metrics of the senior leader reward
framework. Reflecting on the existing arrangements under
the AIP and PSP and their operation during 2023, the
Committee agreed the incentive schemes worked as
intended. As a result, no significant changes have been
proposed for the forthcoming year.
For 2024, the AIP will continue to be largely focused on the
profitable performance of the Group with 70% of any
payment being measured against Group operating profit
targets. For 2024 the Committee has approved an
amendment to the cash metric within the AIP from cash
generation to cash conversion, still maintaining a 20%
weighting within the plan. This change, reflecting cash
generation as a percentage of profit, ensures a continued
focus on strong cash management, incentivising sales to
cash conversion independently of demand and profitability.
Although our Remuneration Policy provides for a maximum
opportunity of up to 200% of salary, the maximum payment
available under the AIP in 2024 will remain at 150% of salary
for the Group CEO and 125% of salary for the CFO.
The PSP will continue to be measured against three key
performance metrics which together focus on driving
long-term sustainable profit growth against our peers,
ultimately seeking to drive shareholder value, namely
earnings per share (EPS), relative total shareholder return
(TSR) and a reduction in scope 1 and 2 greenhouse gas
(GHG) emissions. The Committee reviewed the targets
against the long-term financial plans and determined no
changes were required under the EPS and TSR elements for
the 2024 award. Targets for the reduction in GHG emissions
have been updated reflecting the continued progress
required for the period to 2026. For 2024 PSP awards
onwards, the baseline for comparison has been adjusted to
include the acquisitions of Vulcanic and Durex Industries.
Reduction targets will be based on this revised baseline,
which by 2026 will require a total 50% reduction in GHG
across the whole Group, including these acquisitions. This
ensures further progress is made over and above the 2023
PSP targets, which, as a reminder, still requires a 50%
reduction across Group businesses (excluding acquisitions).
Further details of the performance targets associated with
the 2024 grant are detailed on page 173.
Looking forward
Looking to the future, the Committee intends to continue to
review Spirax Group’s pay policies, ensuring that Executive
Director pay arrangements support and drive the business
strategy while remaining appropriate when considered
within the overall workforce remuneration frameworks
and the external regulatory environment.
Committee focus for 2024
• Continue to review the incentive arrangements to
ensure an appropriate balance of stretching but
achievable targets
• Support the appointment of a new Board Chair
• Continue to evolve colleague engagement on
remuneration issues
I would like to thank our shareholders for their continued
support during the year. I will be available at the Company’s
Annual General Meeting on 15th May 2024 to answer any
questions in relation to this Remuneration Report.
Jane Kingston
Chair of Remuneration Committee
6th March 2024
160
Spirax Group Annual Report 2023
Governance Report At a glance summary: Executive Directors’ remuneration
Executive Directors’ remuneration framework
Fixed pay
To enable the Group to attract, retain and
motivate high performing Executive
Directors of the calibre required to meet the
Group’s strategic objectives.
Annual Incentive Plan (AIP)
To incentivise and reward for performance
against the short-term delivery of key
metrics linked to the business strategy.
Performance Share Plan (PSP)
To incentivise, reward and retain Executive
Directors for delivery against long-term
Group performance, driving sustainable
Group performance aligned with
shareholders’ interests.
Pay outcomes for 2023
Fixed pay
AIP
PSP
Total pay
5.3% inflationary
increase in January
2023 in line with other
UK senior leaders
• Base salary
• Benefits
• Pension
+
Payments made were
10% of maximum bonus
opportunity
+
18.9% of 2021 PSP
award vested
=
Total payments for
2023 were 33% - 36%
of maximum potential
• Maximum opportunity:
150% of salary (CEO) and
125% of salary (CFO)
• Maximum grant: 200% of
salary (CEO) and 175% of
salary (CFO)
• Measured against Group
operating profit (70%),
cash generation (20%)
and personal strategic
objectives (10%)
• Measured against EPS
outperformance of Global
IP (60%) and relative
TSR (40%)
• Sum total of pay elements
Pay subject to performance
A significant proportion (c.75%) of an Executive
Director’s potential remuneration is only payable to the
extent the stretching performance conditions have
been achieved.
CEO
CFO
Pay at risk
After payment, there are further mechanisms in place to ensure decisions
made at the most senior levels are aligned with shareholders’ and
colleagues’ interests over a long-term period.
26%
24%
AIP
PSP
Year 1
Year 2
Year 3
Year 4
Year 5
Performance period
Period subject to withholding and recovery provisions
74%
76%
Variable pay
Fixed pay
Share ownership
Executive Directors are required to build a substantial shareholding in the Company to ensure alignment with shareholders’ interests.
This shareholding continues to apply for two years after leaving the Company.
Actual shareholding – achievement against guideline
N.J. Anderson
N.B. Patel
300%
200%
376%
3.76 x salary
847%
8.47 x salary
0%
200%
400%
600%
800%
1,000%
Policy guideline
Actual shareholding
% of salary shareholding
Spirax Group Annual Report 2023
161
Governance Report Remuneration continued
Annual Report on Remuneration
Annual remuneration report
Governance
Details of the Committee membership can be found in the Committee Chair’s report on page 115 and full biographies of the
Committee members can be found on pages 112 and 113. Each Committee member is an Independent Non-Executive
Director and brings independence to all aspects of Board remuneration and the application of professional advice to matters
relating to remuneration. The General Counsel and Company Secretary acted as Secretary to the Committee with support
from the Assistant Company Secretary. The Committee met six times during the year ended 31st December 2023. Details of
meeting attendance can be found in the Corporate Governance Statement on page 115.
No conflicts of interest with respect to the work of the Committee have arisen during the period and none of the members
of the Committee have any personal financial interest in the matters discussed, other than as shareholders. The fees of the
Non-Executive Directors are determined by the Board on the joint recommendation of the Chair and the CEO. The fees of
the plc Chair are determined by the Committee.
The Committee is formally constituted and operates on written Terms of Reference, which are modelled on the Code and
are available on our website, spiraxgroup.com/governance-documents.
Advice to the Committee
The Committee takes account of information from both internal and independent sources. During the year it received
external advice from Korn Ferry, which was appointed by the Committee in 2019. Korn Ferry advises on all aspects of the
Company’s Remuneration Policy and reviews our remuneration structures against corporate governance best practice. Korn
Ferry also provides support to the Company and management more generally with the monitoring of TSR performance for
the PSP, Executive remuneration levels and structure, non-Board benchmarking and salary surveys. The Committee
confirms that neither it nor any of its Directors has any connection with Korn Ferry, who is a member of the Remuneration
Consultants Group and complies with its Code of Conduct, which sets out guidelines to ensure that its advice is
independent and objective. The Committee reviews the performance and independence of its adviser on an annual basis.
During the period, Spirax Group incurred fees of £90,535 (plus VAT) from Korn Ferry on a time and materials basis.
The Group’s HR Director provides updates to the Committee, as required, to ensure that the Committee is fully informed
about pay and performance issues throughout the Group. The Committee takes these factors into account when
determining the remuneration of the Executive Directors and senior executives. The CEO also attends at the Committee’s
request but does not participate in discussions regarding their own individual remuneration. The Committee also ran two
focus groups during the year, as part of the review of the Remuneration Policy; see page 159 for more details on these.
Audited information
The information that follows is subject to audit until otherwise indicated.
Single total figure of remuneration (£)
N.J. Anderson
N.B. Patel
2023
2022
2023
2022
750,000
630,500
529,448
502,800
30,107
28,119
19,173
17,911
75,000
150,500
52,945
50,280
855,107
809,119
601,566
570,991
112,500
560,531
66,181
388,413
179,971
1,727,816
125,542
1,195,133
1,788
1,837
1,883
1,729
294,259 2,290,184
193,606
1,585,275
1,149,366 3,099,303
795,172
2,156,266
Executive Directors
Basic salary(a)
Taxable benefits(b)
Pension(c)
Total fixed pay
Annual bonus(d)
PSP(e)
ESOP(f)
Total variable pay
Total pay
162
Spirax Group Annual Report 2023
Governance Report J. Pike
R. Gillingwater
J.S. Kingston
K.J. Thompson
C.A. Johnstone
Non-Executive
Directors – Board
Chair, SID and
Committee Chairs
Fees
Other
Total
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
309,000
300,000
76,800
75,000
76,800
75,000
76,800
75,000
76,800
75,000
—
—
—
—
—
—
—
—
—
—
309,000
300,000
76,800
75,000
76,800
75,000
76,800
75,000
76,800
75,000
Non-Executive Directors –
Committee members
Fees
Other
Total
P. France
A. Archon(g)
O. Qui
(to 31st January 2023)
C. Baroudel
(from 3rd August 2023)
2023
2022
2023
2022
61,800
60,000
70,800
60,000
2023
5,150
2022
2023
2022
60,000
25,750
—
—
61,800
60,000
50,379
121,179
31,292
91,292
0
8,599
—
5,150
68,599
25,750
—
—
—
Notes to the remuneration table
(a) This is the amount earned in respect of the financial period.
(b) This is the taxable value of benefits paid or payable in respect of the financial period. These benefits typically relate to car allowance and
medical insurance.
(c) UK tax legislation imposes penalty taxes on annual pension contributions where prescribed maximum amounts are exceeded. The Committee has
previously determined that impacted Executive Directors would receive pension benefits limited to the prescribed maximum amounts and an
additional taxable supplementary cash payment equal to the cost to the Group of the pension benefit forgone.
(d) This is the total bonus earned under the Annual Incentive Plan in respect of the financial year.
(e) The amount shown relates to the market value of PSP awards whose performance period ended during the relevant financial year. Refer to pages
167 and 168 for details of PSP awards made during 2023.
Over the 2021 PSP vesting period the share price decreased from £117.70 at grant (4th May 2021) for N J Anderson and N B Patel, to £91.17, which
was the average share price over October, November and December 2023, a decrease in value of the vesting shares of around £26.53 per share.
The amount attributable to share price appreciation included above is therefore nil. As the award will not vest before the publication of the 2023
annual results and therefore the value at vesting will not be known, the value will be restated next year in the single figure table when the share
price at vesting is known.
(f) The benefit of the ESOP awards is calculated as the number of shares awarded multiplied by the share price on the date of the award.
(g) Fee includes long-haul intercontinental travel allowance effective from 1st April 2023.
Additional requirements in respect of the single total figure table of remuneration
Performance-related pay earned in the year to 31st December 2023
Annual Incentive Plan (AIP)
Executive Directors participate in the AIP, which rewards them for financial and non-financial performance of the Group.
Metrics are reviewed annually to ensure continuing alignment with strategy and are agreed at the start of the year. Resulting
awards are determined following the end of the financial year by the Committee, based on performance against these
targets.
For the CEO, achievement of target performance results in a bonus of 90% of salary, increasing to 150% of salary for
maximum performance. For the CFO, achievement of target performance results in a bonus of 75% of salary, increasing to
125% of salary for maximum performance.
For the 2023 AIP Executive Directors were measured against the following financial and non-financial objectives:
Financial
Group operating profit
Group cash generation
Non-financial
Personal strategic objectives
70%
20%
10%
Spirax Group Annual Report 2023
163
Governance Report
Remuneration continued
Annual Report on Remuneration continued
Additional requirements in respect of the single total figure table of remuneration continued
Performance related pay earned in the year to 31st December 2023 continued
The performance measure is adjusted to reflect certain items including the amortisation of acquisition-related intangible
assets and exceptional reorganisational costs and to exclude any profit contribution and other impacts such as major
acquisitions or disposals during the period as these were not included within the targets when set by the Committee.
The Committee assessed the metrics as follows:
Financial metrics
The table below summarises the achieved performance in 2023 in respect of each of the financial measures used in the
determination of the AIP, together with an indication of actual performance relative to target.
2023 measures
Group operating profit (70% weighting)
% of metric achieved
Group cash generation (20% weighting)
% of metric achieved
% of total financial metrics achieved (90%)
Actual
performance
Achieved
(% of Target)
Threshold
Target Maximum
£349.1m
84.1% £394.3m
£415.1m £435.9m
0.0%
15%
60%
100%
£281.7m
87.6% £305.6m £321.7m £337.8m
0.0%
0.0%
15%
60%
100%
Non-financial metrics – personal objectives
The Executive Directors were each obliged to complete a self-assessed appraisal of their performance against each of their
personal strategic objectives. The Group Chief Executive reviewed this self-assessment with the Chief Financial Officer and
made his own assessment. In the case of the Group Chief Executive, the Chair of the Board conducted the assessment. A
report was submitted to the Committee at its February 2024 meeting; the Committee reviewed the recommendations and
approved the achievements detailed below.
Nicholas Anderson
Personal strategic objectives 2023 Description
Health, Safety and
Sustainability (HS&S)
• Achieved
Progress the Group’s new Health &
Safety framework while
embedding the Group’s H&S
standards in Vulcanic and Durex
Industries.
Sustainability
• Achieved
Improve the Group’s Sustainability
performance
Inclusion, equity and
wellbeing
Implement the Group’s Inclusion,
Equity and Wellbeing plan.
• Achieved
Commentary
Excellent progress implementing the new H&S Excellence
Framework across the Group during 2023, exceeding
plans in both legacy and recently acquired companies.
Nearly all (99%) of legacy Group companies achieving
Foundation status (vs 95% target) and over half (58% and
64% respectively) of companies in Vulcanic and Durex
Industries achieving Spirax Group Foundation status (vs
50% target).
Strong progress made against a scorecard of
sustainability metrics during the year, including the
deployment of the Cotopaxi STRATA platform to all Group
manufacturing plans to improve monthly management of
the Group’s sustainability performance. In addition, strong
progress made on sustainability investments in
communities through an increase in volunteering hours,
charitable donations and Spirax Group Education Fund
grants for 2023. In particular, Spirax Group Education
Fund grants totalled c. £1.2m for 2023, bringing the total
number of approved grants to 100 and worth c. £2.6m by
66 different operating companies.
Continued progress on embedding and developing the
Group global inclusion plan ‘Everyone Is Included’ to
incorporate Gender and Ethnicity criteria during
succession planning processes. On track to achieve the
2025 gender representation targets of 30% women in
global colleague population and 40% representation
across the Senior Leadership team with c. 26% and 31.7%
representation respectively in 2023. The most recent
assessment of ethnic diversity in the Senior Leadership
team delivered a ratio of 17.6%, well ahead of published
benchmarks of other UK industrial peers.
Result: Based on the above assessments, 100% of this metric was achieved.
164
Spirax Group Annual Report 2023
Governance Report Nimesh Patel
Personal strategic objectives 2023 Description
Health and Safety
• Achieved
Support the implementation of the Group’s
Health & Safety Framework, strengthening the
H&S awareness and culture.
Sustainability
• Achieved
Support the implementation of the Group’s
One Planet Sustainability Strategy, with
special emphasis on your personal leadership
of Strategic Initiative #1 – net zero – on a
Group-wide basis.
Inclusion, equity and
wellbeing
• Achieved
Support the implementation of the Group’s
Everyone is Included Plan, with special
emphasis on achieving further gender and
ethnicity diversity.
Improvement in governance
and control environment
• Achieved
Lead the implementation of the G3 Project on
a Group-wide basis, with special emphasis on
improvement of governance and control
structures, embedding changes in the policy
framework and control processes, as well as
development of Fraud prevention frameworks.
Information technology
and systems
• Achieved
Advance the Group’s global Cyber security
infrastructure, processes and responsiveness.
Support the development of global ERPs, CRM
& BI across our three Businesses and the
implementation of our Digital Strategy.
Commentary
Active support provided to drive continued
focus on safety and compliance standards.
Supporting the implementation of the new
H&S Excellence Framework by championing
Safety reflections in Finance Leadership
meetings and Global Finance Forum; “Visible
Felt Leadership” in operations visits and
engaging colleagues in safety conversations.
Significant progress made in 2023 towards
achieving net zero target, including (i) the
reduction of scope 1 and 2 GHG emissions by
50% in 2025 (currently 46%) through the
identification and prioritisation of new
initiatives; (ii) development of scope 3
emission reduction strategy and (iii) on track
for 20% reduction in energy usage by 2025
(currently 13%).
Championed Inclusivity, Equity and Wellbeing
both internally and externally. Actively worked
to raise Spirax Group’s profile as an employer
of choice through partnering with bodies such
as the Change the Race Ratio and co-Chairing
the FTSE Women Leaders programme. Strong
colleague engagement and enablement
results for the global finance function.
Continued the implementation of G3
programme, rolling-out revised policy,
processes and training, supported by launch
of new digital tool. In addition, established an
Internal Controls team to review and improve
critical control processes in existing and
acquired businesses to ensure Group
standards are achieved. Improvements made
in open audit item closures.
Strong progress made during the year to
develop the global IT function and systems
through the successful recruitment of key
senior leaders across the function,
consolidation of IT services group-wide and
the development of a cyber security roadmap.
In addition, supported the ERP design and
implementation across the Group together
with the launch of a single platform to drive
Group-wide collaboration.
Result: Based on the above assessments, 100% of this metric was achieved.
Spirax Group Annual Report 2023
165
Governance Report Remuneration continued
Annual Report on Remuneration continued
Additional requirements in respect of the single total figure table of remuneration continued
Non-financial metrics – personal objectives continued
N.J. Anderson
N.B. Patel
Performance targets
Fully
achieved
Partly
achieved
Not
achieved
% of
maximum
bonus (10%)
achieved
3
5
0
0
0
0
10%
10%
The Committee is of the view that these outcomes accurately reflect the performance of the Executive Directors and the
Company, consequently no discretion was exercised by the Committee.
As a result of this performance in 2023, the following bonuses were earned:
Executive Directors
N.J. Anderson
N.B. Patel
Bonus
achieved (£)
Actual % of
maximum
Maximum
bonus
opportunity
Bonus
(% of salary)
£112,500
£66,181
10%
10%
150%
125%
15.0%
12.5%
Under the 2023 Remuneration Policy, if an Executive Director has not reached the level of 1.5 times their shareholding
requirement, then they must use the net of tax amount of 25% of their bonus opportunity to purchase shares in the
Company. These shares must be held for a further two years. As both Nicholas Anderson and Nimesh Patel have met their
respective shareholding guidelines, no portion of the 2023 bonus will be deferred into shares.
Performance Share Plan (PSP) – scheme interests vested during the period
2021 PSP award vesting over 2021–2023
In May 2021 the Executive Directors received share awards under the PSP, with vesting subject to EPS growth and relative
TSR performance. The following tables set out details of the performance measures and targets that applied, along with the
actual performance during the period 1st January 2021 to 31st December 2023.
Relative TSR performance (40% of PSP award)
Over the three-year period to 31st December 2023, the Company delivered a TSR of -17.1%. This ranked below the required
threshold performance level for any part of this element to vest. The comparator group, comprising 45 companies, for the
purpose of measuring relative TSR performance, was the FTSE 350 Industrial Goods and Services Supersector constituents
at the start and end of the performance period.
Threshold requirement
Maximum requirement
Actual achievement
Target
Median TSR
Upper quartile TSR or above
Below median
TSR
Vesting
14.7%
32.4%
-17.1%
18.0%
100.0%
0.0%
EPS growth (60% of PSP award)
Over the three-year performance period to 31st December 2023, the Company delivered adjusted EPS growth of 20.5%.
Over the three years, adjusted EPS (in line with scheme rules) equates to a compound annual growth of 6.4% per annum.
EPS is derived from the audited Annual Report for the relevant financial year but adjusted to exclude the items shown
separately on the face of the Consolidated Income Statement. EPS was adjusted for the acquisition of the Vulcanic Group
and the disposal of the Russian business.
Threshold requirement
Maximum requirement
Actual achievement
EPS
Vesting
17.0%
38.2%
20.5%
18.0%
100.0%
31.5%
As a result of the TSR and EPS performance outcomes for the three-year period to 31st December 2023, 18.9% of the shares
granted under the 2021 PSP will vest in March 2024. The Committee considers this achievement and consequent payment
is a fair reflection of business performance throughout the performance period and in line with shareholders’ experience.
166
Spirax Group Annual Report 2023
Governance Report Executive Directors
N.J. Anderson
N.B. Patel
No. of
shares
granted 1
Price at
grant
Value at
grant
10,433
£117.70 £1,227,964
7,279
£117.70
£856,738
No. of
shares
vesting
1,974
1,377
Vesting
price 2
Vesting
value
Amount
attributable
to growth
in share
price
£91.17
£179.971
-£52,369
£91.17
£125,542
-£36,531
1 The 2021 PSP awards were granted on 4th May 2021.
2 Based on share price of £91.17, which was the average share price over October, November and December 2023. As the award vests after the
publication of the 2023 annual results, figures will be restated for the actual vesting value in next year’s Annual Report.
Scheme interests awarded during the period
2023 PSP award vesting over 2023–2025
The Committee makes an annual conditional award of shares to each Executive Director under the PSP. Prior to award, the
Committee reviews the performance targets for each measure to ensure they remain sufficiently stretching. For EPS this
includes a review of analysts’ forecasts.
The awards were granted under the PSP as a contingent right to receive shares, with the face value calculated as a
percentage (200% for the Group CEO and 175% for the CFO of base salary), using the share price at date of award. Awards
were made on 13th March 2023.
For awards made in 2023, vesting is based on three performance conditions as illustrated below measured over a three-
year period. These performance measures have been chosen as they are considered to be an appropriate balance of the
key performance indicators most aligned with our Strategy. In addition to the three-year performance period, a two-year
holding period applies. The 2023 PSP performance metrics are detailed below and explained further on page 168.
Financial
Earnings per share growth
Relative total shareholder return
Reduction in greenhouse gas emissions
50%
30%
20%
PSP shares
granted
Face value of
award on grant 1
Last day
of the
performance
period
13,786
£1,499,917
31.12.2025
8,515
£926,432
31.12.2025
Vesting at
threshold
performance
18%
18%
Non-financial
Executive Directors
N.J. Anderson
N.B. Patel
1 Based on the share price on the date of award of £108.80.
Performance measure
EPS growth
Relative TSR2
Greenhouse gas emissions 2025
Weight
Threshold requirement
Maximum requirement
50%
30%
20%
Global IP +2% pa1
Median TSR
24,273 tonnes
Global IP +7% pa
Upper quartile TSR
21,962 tonnes
1 The Global Industrial Production Growth (IP) data source is the CHR Metals Global IP Index, providing data that incorporates over 90% of global
industrial output.
2 Vesting is calculated based on Spirax Group’s TSR relative to the median and upper quartile TSR of the peer group.
Spirax Group Annual Report 2023
167
Governance Report Remuneration continued
Annual Report on Remuneration continued
Additional requirements in respect of the single total figure table of remuneration continued
2023 PSP award vesting over 2023-2025 continued
For achievement of the threshold performance requirement, 18% of the award can be earned. Vesting will take place on a
straight-line basis for performance between the threshold and maximum requirements. Performance below the threshold
requirement for a performance measure will result in nil vesting for that part of the award. The Committee has discretion to
adjust the formulaic outcome if it is not representative of the Company performance delivered.
The EPS element of the PSP is based on growth in excess of global industrial production growth rates, often referred to in
our industry as ‘Global IP’. Global IP is a measure the Board and management have used for some time as there is well
documented evidence that it is the best predictor of the global and industrial markets within which the Group operates. For
these reasons, Global IP was used in the formulation of the long-term strategic plan and targets for EPS growth approved by
the Board. Adjustments are made to reflect material businesses which are acquired and sold.
The TSR element of the PSP assesses performance relative to a comparator group of companies. As was reported last year,
for the grant awarded in 2023, the TSR peer group comprises the constituents of the FTSE 100, less companies in the
Mining, Oil & Gas and Financial Services sectors, at the start of the performance period. This is the same sector
classification as Spirax Group and was selected as it objectively provides a sufficiently robust number of companies to
compare performance against, which also operate in the industrial goods and services arena. While the exact number of
companies varies from year to year, the comparator group for the 2023 award was 70 companies.
The environmental element of the PSP assesses the extent to which we are meeting our sustainability goals. We have
targeted management through the PSP to reduce greenhouse gas emissions to 24,273 tonnes or below by the end of 2025
for this part of the award to vest. The award will be calculated on a straight-line basis, with the maximum payout achieved
for emissions at or below 21,962 tonnes.
Employee Share Ownership Plan (ESOP)
Executive Directors are eligible to participate in an HMRC-approved Share Incentive Plan known as the ESOP.
During the year ended 31st December 2023, Nicholas Anderson purchased 19 partnership shares and was awarded 19
matching shares. Nimesh Patel purchased 20 partnership shares and was awarded 20 matching shares. Further information
is set out in the table on page 170.
The maximum annual investment in shares is £1,800 (the HMRC limit) for Executive Directors (and eligible UK colleagues).
This can be matched by the Company on a one-for-one basis for each share that is purchased. Dividends paid can be
reinvested as shares. Any surplus contributions from the previous year are carried over and added to the money contributed
to purchase shares in the year.
Shares acquired under the ESOP are not subject to performance measures as the aim of the ESOP is to encourage increased
shareholding in the Company by all eligible UK colleagues. In 2023, around 62% of eligible UK colleagues purchased
partnership shares and were awarded matching shares under the ESOP.
Benefits (excluding pension)
Benefits
Company car and associated running costs or cash alternative allowance
Private health insurance
N.J. Anderson
N.B. Patel
£29,694
£18,760
£413
£413
Pension
With effect from 1st January 2023 all Executive Director pensions were aligned with the wider workforce. During the year,
Nicholas Anderson and Nimesh Patel received 10% of their basic salary in cash which, in the year ended 31st December
2023, amounted to £75,000 and £52,945 respectively.
168
Spirax Group Annual Report 2023
Governance Report Directors to be appointed to the Board
Louisa Burdett will join the Board in July 2024 as Chief Financial Officer. Her basic annual salary will be £550,000. Louisa is
eligible to receive a car cash allowance on appointment of £19,500 p.a. and a pension cash allowance of 10% of salary,
consistent with that provided to all other eligible UK colleagues. In line with the Company’s Recruitment Policy, Louisa will
receive compensation for lost incentive arrangements from her previous employer. These comprise a replacement award
under the 2023 Performance Share Plan with a face value of £735,000, being the equivalent value lost as a consequence of
resigning to join Spirax Group. Louisa will also be considered for compensation for lost bonus payments of equivalent value
to those forfeit. Replacement awards follow as closely as practicable the structure and time horizons of the original awards.
All other incentive arrangements for Louisa are aligned with those outlined earlier in this report and are consistent with our
Policy.
Payments to past Directors
There were no payments made to past Directors during the year ended 31st December 2023.
Payments for loss of office
There were no payments made to Directors for loss of office during the year ended 31st December 2023.
External directorships
Nicholas Anderson served as a Non-Executive Director at BAE Systems plc during 2023, for which he received and retained
total fees of £110,050.
Statement of Directors’ shareholding and share interests
Share ownership guidelines
The Executive Directors’ share ownership guidelines are 300% of base salary for the Group Chief Executive and 200% of
base salary for other Executive Directors.
The share ownership guidelines have been exceeded by both the CEO and the CFO. The value of the shareholding is taken
at 31st December 2023 as a percentage of 2023 base salary. The closing share price on 29th December 2023 (being the
last trading date of 2023) was £105.05.
N. Anderson
300%
N. Patel
200%
376%
846%
0%
200%
400%
600%
800%
1,000%
1,200%
1,400%
Policy guideline
2023 % of salary
Outstanding share interests
The following table summarises the total interests of the Directors in shares of the Company as at 31st December 2023.
These cover beneficial and conditional interests. No Director had any dealing in the shares of the Company between
31st December 2023 and 29th February 2024 (being the latest practicable date prior to publication).
J. Pike
N.J. Anderson
N.B. Patel
R. Gillingwater
J.S. Kingston
K.J. Thompson
C.A. Johnstone
P. France
A. Archon
C. Baroudel
1 Includes any shares owned by connected persons.
2 Unvested shares remaining subject to performance measures.
3 Last practicable date before publication.
PSP
awards 2
ESOP
shares
Total
31.12.23
Total
29.02.24 3
Beneficial 1
11,061
—
68,817
37,453
21,744
23,181
600
6,370
4,900
451
980
255
300
—
—
—
—
—
—
—
—
835
105
11,061
11,061
107,105
107,105
45,030
45,030
—
—
—
—
—
—
—
600
6,370
4,900
451
980
255
300
600
6,370
4,900
451
980
255
300
Spirax Group Annual Report 2023
169
Governance Report Remuneration continued
Annual Report on Remuneration continued
Additional requirements in respect of the single total figure table of remuneration continued
Unvested share awards (included in the previous table)
N.J. Anderson
N.B. Patel
Unaudited information
PSP shares subject to
performance conditions
2021
2022
2023
10,433
13,234
13,786
7,279
7,387
8,515
Shares
not subject to
performance
conditions
2023 ESOP
awards
38
40
TSR performance graph
In 2023, the Committee altered the constituent group for the measurement of the TSR to the FTSE 100, less companies in
the Mining, Oil & Gas and Financial Services sectors, from the FTSE 350 Industrial Goods and Services Supersector as it was
felt it was a more accurate reflection of the Group’s performance as an established FTSE 100 Company. The graph below
demonstrates the growth in value of a £100 investment in the Group compared to the FTSE 100, less companies in the
Mining, Oil & Gas and Financial Services sectors, from January 2023 to December 2023. The graph also includes a
comparison to the FTSE 350 Industrial Goods and Services Supersector as this still applies to PSP awards granted in 2022,
and how the Group Chief Executive’s total pay compares over the period.
Aligning pay with performance
The table below shows the historical levels of the CEO’s pay (single figure of total remuneration) and annual variable and
PSP awards as a percentage of maximum.
Spirax-Sarco Engineering plc
FTSE 350 Industrial Goods & Services Supersector
FTSE 100
Jan 2013
Dec 2014
Dec 2015
Dec 2016
Dec 2017
Dec 2018
Dec 2019
Dec 2020
Dec 2021
Dec 2022
Dec 2023
)
£
(
e
u
a
V
l
700
600
500
400
300
200
100
0
CEO single figure
(£000)
AIP payment
(% of maximum)
PSP vesting
(% of maximum)
£1,000
£1,191
£1,611
£2,173
£2,323
£2,788
£2,220
£3,325
£3,099
£1,149
55.8%
61.4%
99.2%
100.0%
92.5%
82.6%
30.0%
98.0%
59.3%
10.0%
33.1%
80.3%
40.0%
100.0%
100.0%
100.0%
73.9%
100.0%
100.0%
18.9%
170
Spirax Group Annual Report 2023
Governance Report
Percentage change in remuneration of the Directors and employees
The following table provides a summary of the increases in base salary, benefits and bonus for the Directors compared to
the average increase for colleagues in the same period, for the last four years. The regulations require disclosure of the
change in remuneration of the employees of the Parent Company. As Spirax-Sarco Engineering plc only employs the
Executive Directors (whose individual information is already included below), the general UK colleague population
comparator group has been used to give a more meaningful comparison.
% change on prior year for 2020 % change on prior year for 2021 % change on prior year for 2022 % change on prior year for 2023
UK colleagues
N.J. Anderson
N.B. Patel
J. Pike
J.S. Kingston
K.J. Thompson
C.A. Johnstone
P. France
A. Archon1
O. Qiu
(to 31st January 2023)
R. Gillingwater
C. Baroudel
(from 3 August 2023)
Salary/
fees
2.9%
2.9%
N/A
2.9%
2.9%
2.9%
2.9%
2.9%
N/A
N/A
N/A
Benefits
Bonus
2.9% -32.1%
2.9% -62.6%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Salary/
fees
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
N/A
Benefits
Bonus
2.0% 120.7%
2.0% 233.2%
Salary/
fees
2.7%
2.7%
Salary/
Benefits
Bonus
fees Benefits
Bonus
2.7% -26.2%
7.1%
7.1% -70.5%
2.6% -37.9%
19.0%
7.1% -79.9%
7.1% -83.0%
2.0% 240.0%
2.7% -33.4% -36.5%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
32.3%
16.6%
16.6%
16.6%
10.4%
N/A
N/A
N/A
N/A
N/A
10.4%
45.7%
10.4% -63.2%
16.6%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
5.3%
3.0%
2.4%
2.4%
2.4%
3.0%
N/A
N/A
N/A
N/A
N/A
18.0% 61.0%
3.0% -100.0%
2.4%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1 Change for 2023 fees reflects a 3.0% increase in base fee and the introduction of a long-haul intercontinental travel allowance from 1st April 2023.
Group Chief Executive pay ratio
The table below details the ratio of the CEO’s single figure of total remuneration to the median, 25th and 75th percentile
total remuneration of the Group’s full-time equivalent UK colleagues. As in previous years, Option B has been chosen for
these calculations as the data used is consistent with that collected to inform the Group’s UK gender pay gap. To ensure the
individuals identified at the three quartiles are representative of the UK workforce, the total pay and benefits for a small
number of colleagues centred around each quartile were also considered to confirm there were no anomalies. The
individuals identified were deemed appropriately representative.
Financial year
Methodology
25th percentile
50th percentile
75th percentile
2023
2022
2021
2020
2019
Single figure total remuneration
Salary
Benefits
Bonus
PSP
Pension
ESOP
Total pay
Option B
Option B
Option B
Option B
Option B
33:1
91:1
111:1
76:1
110:1
28:1
65:1
83:1
66:1
74:1
18:1
51:1
62:1
45:1
46:1
CEO
25th percentile
50th percentile
75th percentile
£750,000
£30,535
£39,937
£52,530
£30,107
£112,500
£179,971
75,000
£1,788
£1,149,366
£413
£770
—
£2,748
£847
£35,313
£413
£125
—
£0
£1,035
£41,510
£413
£5,518
—
£4,644
£1,506
£64,611
Year-on-year commentary
As shown earlier in this report, a sizeable proportion of the CEO’s total potential remuneration is linked to performance
outcomes significantly impacting the annual CEO pay ratio calculation. Variable pay for the CEO was lower in 2020 than
2019 and 2021, impacted by the challenging world events of the Covid-19 pandemic. In 2022, a lower bonus was paid due to
profit and cash generation achievement against targets, reducing the ratio. For 2023, the ratio reduced more significantly
due to the incentive outcomes for both the AIP and PSP vesting as described earlier in this report. The CEO’s total variable
pay for 2023 was £294,260 (comprising 26% of total remuneration) compared with £2,290,185 (74% of total remuneration) in
2022.
Spirax Group Annual Report 2023
171
Governance Report Remuneration continued
Annual Report on Remuneration continued
Unaudited information continued
Relative importance of spend on pay
The table below demonstrates the relative importance of total pay spend relative to total colleague numbers, profit before
tax (selected as the best measure of efficiency) and dividends payable in respect of the year.
Total employee pay spend
Group average headcount
Adjusted profit before tax
Dividends payable
2023
2022
Change
£634.2m £572.3m
10,122
9,368
10.8%
8.0%
£309.2m £370.6m
-16.6%
£117.8m
£112.0m
5.2%
Statement of voting at the Annual General Meeting
At the AGM in 2023, shareholders approved the Remuneration Policy 2023 (mandatory) and the Annual Report on
Remuneration 2022 (advisory). The following table shows the results which required a simple majority (i.e. 50%) of the votes
cast to be in favour for the resolutions to be passed.
Remuneration Policy 2023 (2023 AGM)
Annual Report on Remuneration 2022 (2023 AGM)
Votes
for
%
Votes
against
54,257,130
91.09
5,303,941
57,289,505
96.19
2,272,148
%
8.91
3.81
Votes
withheld 1
290,647
290,065
1 A vote withheld does not constitute a vote in law and therefore has not been included when calculating the percentages above.
172
Spirax Group Annual Report 2023
Governance Report Operation of Policy for 2024
The table below summarises how we will implement each element of remuneration under the 2023 Remuneration Policy
adopted by shareholders at the AGM on 10th May 2023.
Element of remuneration
How we will implement the Policy in 2024
Salary
Salaries will be as follows from the respective date of appointment:
• Group CEO: £720,000 (effective 16th January 2024)
• CFO: £550,000 (effective from July 2024)
Pension
Pension contributions for the Executive Directors will be 10% of salary.
Annual Incentive Plan
(AIP)
The maximum annual bonus opportunity for the Executive Directors will be 150% of base
salary (Group CEO) and 125% of base salary (CFO).
The plan structure for 2024 will be largely unchanged from 2023. Cash conversion replaces
cash generation as the cash metric (still retaining a 20% weighting):
Performance Share Plan
(PSP)
Non-Executive
Director fees
Performance measure
Group adjusted operating profit
Cash conversion
Personal strategic objectives
Weighting (% of bonus)
70%
20%
10%
The targets for the AIP are considered to be commercially sensitive and therefore will be
disclosed in next year’s Directors’ Remuneration Report.
The Committee has discretion to adjust the formulaic outcome if it is not representative of the
performance delivered.
Executive Directors will be required to use 25% of any bonus received to purchase shares in
the Company which must be held for a further two years. The exception to this rule is if a
Director’s shareholding is already at least 150% of their shareholding requirement, no deferral
into shares will be required.
PSP award levels will be 200% of base salary (Group CEO) and 175% of base salary (CFO).
There are no changes to the performance measures or weightings as summarised below:
• The EPS performance range for the 2024 PSP grant will start at IP +2% p.a. for threshold
vesting rising to IP +7% p.a. for maximum vesting
• The TSR comparator group remains a subset of the FTSE 100, excluding Mining, Oil & Gas
and Financial Services as per the 2023 award
• The GHG measure will now include Vulcanic and Durex Industries. As a result, the baseline
for measurement has increased. The midpoint of the range set for 2026 is to halve GHG
emissions in absolute terms from this expanded baseline
Performance measure
EPS growth
Relative TSR
Greenhouse gas emissions 2026
Weight
50%
30%
20%
Threshold requirement
(18% vests)
Maximum requirement
(100% vests)
Global IP +2% p.a.
Global IP +7% p.a.
Median TSR
Upper quartile TSR
27,449 tonnes
24,834 tonnes
The Committee has discretion to adjust the formulaic outcome if it is not representative of the
Company performance delivered. A two-year post-vesting holding period will apply to the awards.
As a result of benchmarking, and an assessment of time commitment, a market adjustment to
the plc Chair and Non-Executive Director fees was implemented. Effective from 1st January
2024, the fee is £350,000 (was £309,000) and the base fee for the Non-Executive Directors is
£70,000 (was £61,800).
Additional fees for Committee Chair and Senior Independent Director responsibilities were
also increased to £20,000 p.a. (was £15,000).
In addition, an annual long-haul intercontinental travel allowance fee of £12,000 has been
introduced for Directors based outside of the UK to reflect the significant additional time
requirement in attending Board and Committee meetings in the UK.
Spirax Group Annual Report 2023
173
Governance Report Remuneration continued
Annual Report on Remuneration continued
Unaudited information continued
Directors’ service agreements and letters of appointment
Original appointment
date
Current agreement/
appointment/
reappointment letter
Expiry date
Notice period
No. of years service
as at
31st December 2023
Executive Directors
N.J. Anderson
N.B. Patel
Chair and Non-Executive
Directors
J. Pike
A. Archon
C. Baroudel
P. France
R. Gillingwater
C.A. Johnstone
J.S. Kingston
K.J. Thompson
15/03/2012
27/07/2020
01/05/2014
01/12/2020
01/08/2023
06/03/2018
10/03/2021
05/03/2019
01/09/2016
15/05/2019
13/12/2013
01/04/2020
12/05/2021
01/12/2023
01/08/2023
06/03/2021
10/03/2021
04/03/2022
01/09/2022
15/05/2022
N/A
N/A
12 months
11 years, 9 months
12 months
3 years, 5 months
11/05/2024
30/11/2026
31/07/2026
05/03/2024
09/03/2024
04/03/2025
31/08/2025
14/05/2025
3 month
9 years, 7 months
1 month
3 years, 0 months
1 month
0 years, 4 months
1 month
5 years, 9 months
1 month
2 years, 9 months
1 month
4 years, 9 months
1 month
7 years, 3 months
1 month
4 years, 7 months
Chair and Non-Executive Directors
The Chair and Non-Executive Directors have letters of appointment with the Company for a period of three years, subject to
annual re-election at the AGM. Appointments may be terminated by the Company or individual with three month’s notice for
the Chair and one month’s notice for all other Non-Executive Directors. The appointment letters for the Chair and Non-
Executive Directors provide that no compensation is payable on termination, other than accrued fees and expenses.
Remuneration Policy
The 2023 Remuneration Policy, which applies to this year’s Directors’ Remuneration Report, was approved on 10th May 2023
and can be found in full in our 2022 Annual Report on pages 160 to 168 and on our website, spiraxgroup.com. A summary of
the 2023 Remuneration Policy follows this report on pages 175 to 178.
This Annual Report on Remuneration 2023 has been approved by the Board of Directors and signed on its behalf by:
Jane Kingston
Chair of Remuneration Committee
6th March 2024
174
Spirax Group Annual Report 2023
Governance Report Summary Remuneration Policy
This report sets out a summary of Spirax-Sarco Engineering plc’s Remuneration Policy for Executive and Non-Executive
Directors. The full Policy was approved by shareholders at the AGM on 10th May 2023 and can be found on our website at
spiraxgroup.com/governance-documents. The Policy took effect from this date and is designed to attract, retain and
motivate our leaders within a framework designed to promote the long-term success of Spirax Group and aligned with our
shareholders’ interests.
Executive Directors’ 2023 Summary Remuneration Policy
The table below summarises the Remuneration Policy which took effect on 10th May 2023.
Element
Operation
Maximum potential value
Base salary
Salaries are typically reviewed annually by the Committee
considering a number of factors, including the scale and complexity
of the role, experience of the individual, wider workforce comparison,
external market data and the impact of any increase on the total
remuneration package.
Ordinarily, salary increases will
not exceed the average increase
awarded to other Group
colleagues from the same
country/region.
The maximum pension
contribution for Executive
Directors will be the same as is
available to the majority of
colleagues in the market in which
the Executive Director is based.
The aggregate maximum cash
cost of providing all common
benefits will not exceed 20% of
base salary.
Based on individual
circumstances and subject to
written agreement.
Maximum values will not exceed
the normal market practice of
companies of a similar size and
nature at the time of relocation.
Maximum potential award of
200% of salary.
Currently the maximum award
level is 150% of salary. Any
increase beyond this level will
only take place following
consultation with leading
shareholders.
Pension
For UK nationals, the Company provides a defined contribution
pension arrangement and/or contributions to a private pension and/or
a cash allowance.
Common
benefits
The Company provides common benefits including:
• Company car and associated running costs or cash
alternative allowance
• Private health insurance and telecommunications and
computer equipment
• Life assurance
• Long-term disability insurance
Mobility-
related
benefits
The Company will pay all reasonable expenses and applicable tax
due for the Executive Director and their family to relocate on
appointment and for repatriation to the original home country at the
end of their assignment and/or employment in line with our mobility
policies.
Executive Directors are not entitled to tax equalisation.
Annual
Incentive Plan
(AIP)
Measures, targets and their relative weightings are reviewed
regularly by the Committee to ensure continuing alignment with
strategic objectives and will be detailed in the relevant Annual Report
on Remuneration. Bonus is delivered in cash. If an Executive Director
has not reached the level of 1.5 times their shareholding requirement,
then they must use the net of tax amount of 25% of their bonus
opportunity to increase the level of shareholding they have and to
hold these shares for two years.
Any measure can be incorporated at the Committee’s discretion
provided it is aligned to the Group’s strategic objectives; however, at
least 70% of the bonus opportunity will be governed by financial
performance measures.
Bonus payments are subject to clawback and/or malus for up to three
years following payment. Circumstances include financial
misstatement, erroneous calculations determining bonus payments,
gross misconduct, corporate failure and reputational damage.
The Committee can adjust some performance targets to reflect certain
non-operating items and retains the ability to adjust the amount of a
bonus if the formulaic outcome is not reflective of the individual or
business performance or the broader shareholder experience.
Spirax Group Annual Report 2023
175
Governance Report Remuneration continued
Summary Remuneration Policy continued
Executive Directors’ 2023 Summary Remuneration Policy continued
Element
Operation
Performance
Share Plan
(PSP)
The Committee makes conditional awards of rights over shares to
Executive Directors. Performance is measured over a three-year
period, normally starting at the beginning of the financial year in
which awards are granted. An additional two-year post-vesting
holding period will apply.
Annual participation is subject to Committee approval. Measures,
targets and their relative weightings are reviewed regularly by the
Committee to ensure continuing alignment with strategic objectives
and will be detailed in the relevant Annual Report on Remuneration.
At least 50% of the award will be based on financial and/or share
price related metrics.
The Committee retains the ability to adjust awards if the formulaic
outcome is not reflective of the individual or business performance or
broader shareholder experience.
Share awards are subject to clawback and/or malus for up to five
years following initial award. Circumstances include financial
misstatement, erroneous calculations determining bonus payments,
gross misconduct, corporate failure and reputational damage.
Eligible UK Executive Directors are entitled to participate in an
HMRC-approved Share Incentive Plan known as the ESOP.
Employee
Share
Ownership
Plan (ESOP)
Shareholding
requirement
Directors are required to build and hold shares equivalent in value to
a minimum percentage of their salary.
On ceasing to be an Executive Director, the required shareholding (or
level of holding achieved by the date of ceasing) normally has to be
retained for two years.
Maximum potential value
Maximum potential award of
250% of the annual rate of salary
at the time of grant.
Currently the maximum award
level is 200% of salary. Any
increase beyond this level will
only take place following
consultation with leading
shareholders.
Executive Directors will be
subject to the same limitations as
all other participants.
For the Group Chief Executive
this is 300% of salary. For all
other Executive Directors the
requirement is 200% of their
annual salary.
Recruitment Policy and service contracts
The table below summarises the Company’s policy on the recruitment of new Executive Directors. Similar considerations
may also apply where a Director is promoted to the Board. In addition, the Committee has discretion to include any other
remuneration component or award which it feels is appropriate, considering the specific circumstances of the individual,
subject to the limit on variable remuneration set out below. The rationale for any such component would be appropriately
disclosed.
Element
Service contract
Base salary
Pension
Approach
Executive Directors have service agreements that are terminable by either the Company or
the Executive Director on 12 months’ notice.
Service agreements also set out any non-compete restrictions in the 12 months following
the cessation of employment.
Base salary will be set on appointment taking into account the factors set out in the Policy
table. Depending on an individual’s prior experience, the Committee may set salary below
market norms, with the intention that it is realigned over time, typically two to three years,
subject to performance in the role.
Pension benefits will not exceed the rate applicable to the relevant country’s workforce, as
determined by the Committee; Executive Directors who have transferred internally from
overseas may continue to participate in home country pension arrangements and/or
receive a cash allowance in line with the relevant country’s workforce.
Common benefits
As per the Remuneration Policy table.
176
Spirax Group Annual Report 2023
Governance Report Element
Approach
Mobility-related benefits
Mobility-related benefits may include the payment of some or all of an individual’s tax on
relocation expenses incurred within 12 months of joining.
Annual Incentive Plan (AIP)
Ongoing annual incentive pay opportunity will not exceed the maximums stated in the
Policy table; different annual bonus conditions may be made by the Committee to ensure
an immediate alignment of individual interests.
Performance Share Plan
(PSP)
In the year of appointment an off-cycle award under the PSP may be made but will not
exceed the maximums stated in the Policy table.
Employee Share Ownership
Plan (ESOP)
Buy-out awards
As per the Remuneration Policy table.
The Committee reserves the right to buy out remuneration that the individual has forgone
by accepting the appointment, if appropriate. The terms of such awards would be informed
by the amounts being forfeited and the associated terms (for example the extent to which
the outstanding awards were subject to performance, the vehicles and the associated time
horizons). Awards would be made either through the existing share plans or in accordance
with the relevant provisions contained within the Listing Rules.
Termination Policy
The Company may choose to terminate the contract of any Executive Director in line with the terms of their service agreement,
either by means of a payment in lieu of notice or through a series of phased payments subject to mitigation. Service
agreements may be terminated without notice and, in certain circumstances such as gross misconduct, without payments.
The table below summarises our Termination Policy for Executive Directors under their service agreements and the
incentive plan rules.
Element
Approach
Base salary, pension and
common benefits
Mobility-related benefits
Payment made up to the termination date in line with contractual notice periods.
The Company will pay all reasonable expenses and applicable tax due for the Executive
Director and their family for repatriation to the original home country at the end of their
assignment and/or employment.
Annual Incentive Plan (AIP) Whilst it is not an entitlement, it is expected that where an Executive Director is a ‘good
leaver’ (i.e. where the cessation of employment is due to death, disability, redundancy,
retirement or the Company business in which they work being disposed of or where the
ending of employment is instigated by the Company and is not for cause), payments will be
made to the extent performance targets are met subject to the Plan rules and the Policy. If
the Executive Director is not a ‘good leaver’ it is expected no payment would be made.
Performance Share Plan
(PSP)
The treatment of outstanding shares under the PSP is determined in accordance with the
shareholder approved PSP rules. In the case of a ‘good leaver’ the award will normally vest
on the normal vesting date to the extent the performance conditions are met, with the
number of shares pro-rated to reflect the period employed within the performance period.
If the Director is not a ‘good leaver’ then all awards will normally lapse in full no later than
last day of employment with the Company.
Employee Share Ownership
Plan (ESOP)
In relation to the ESOP, as an HMRC-approved plan, where an Executive Director leaves
the treatment will be in line with the approved plan rules and HMRC guidance.
The full Policy sets out further detail on the treatment of the Executive Directors’ pay arrangements, including the treatment
of share schemes in the event of a change of control or winding up of the Company.
Spirax Group Annual Report 2023
177
Governance Report Remuneration continued
Summary Remuneration Policy continued
Non-Executive Directors’ 2023 Summary Remuneration Policy
Operation and opportunity
Element
Chair’s fee
• Fees are reviewed annually by the Remuneration Committee
Non-Executive Directors’
basic fee
• The Chair is paid a single fee for all responsibilities
• The fees paid to the Chair and Non-Executive Directors will not exceed the amount set
out in the Articles of Association
• Fees are reviewed annually by the Board
• The fees paid to the Chair and Non-Executive Directors will not exceed the amount set
out in the Articles of Association
Additional fees
Additional fees may be paid for additional responsibilities and time commitments e.g.:
• Board Chair
• Senior Independent Director
• Committee Chair
• Long-haul intercontinental travel
Benefits
• The Chair and Non-Executive Directors do not participate in any annual bonus, incentive
plan, pension scheme or healthcare benefit provided by the Company
• The Chair and Non-Executive Directors are not prohibited from participating in other
benefit arrangements available to the majority of UK colleagues as long as there is no
additional cost to the Company
• The Company repays the reasonable expenses incurred by the Chair and Non-Executive
Directors in carrying out their duties and may settle any tax incurred in relation to these
Remuneration framework for other colleagues
The Company’s approach to annual salary reviews is consistent across the Group, with consideration given to the scope of
the role, level of experience, responsibility, individual performance and market pay levels. The most senior managers in the
business (approximately 350 people globally) participate in bonus arrangements with similar targets, measures and relative
weightings to that of the Executive Directors.
Target and maximum potential values are lower and determined by the grade of the manager’s role. Performance targets are
based on an appropriate combination of Group, Business and local operating company financial measures, in addition to
personal strategic objectives.
Contractual terms and benefits for the wider workforce are subject to local employment legislation and best practice.
178
Spirax Group Annual Report 2023
Governance Report Regulatory disclosures
Good governance is at the heart of our business
helping us to manage and progress our objectives.”
Andy Robson
Group General Counsel and Company Secretary
The Directors present their report and
the audited Financial Statements of the
Group for the year ended 31st December
2023. The following regulatory
disclosures are made in compliance with
the Companies Act 2006 (the Act), the
Listing Rules (LR), the Disclosure
Guidance and Transparency Rules (DTR)
and the 2018 UK Corporate Governance
Code (the Code).
The Board has taken advantage of Section 414C (11)
of the Act to include disclosures in the Strategic
Report on those items indicated in the table at the
end of this report. These, together with this report,
comprise the Directors’ Report (the Report).
Scope of the reporting in this Annual Report
The Board has prepared a Strategic Report (including the
Chair’s Statement, the Chief Executive Officer’s Review, the
Financial Review and the Operating Review) which provides an
overview of the development and performance of the Group’s
business in the year ended 31st December 2023 and its
position at the end of that year, which covers likely future
developments in the business of the Company and the Group.
The Strategic Report can be found on pages 4 to 105.
For the purposes of compliance with DTR 4.1.5R (2) and DTR
4.1.8R, the required content of the management report can be
found in the Strategic Report and these regulatory disclosures,
including the sections of the Annual Report incorporated by
reference. For the purposes of LR 9.8.4CR, the information
required to be disclosed by LR 9.8.4R, which is not covered in
this Report, is set out in the table at the end of this Report.
DTR 7.2 requires certain information to be included in a
corporate governance statement in the Directors’ Report.
Information that fulfils these requirements can be found in the
Corporate Governance Statement on pages 106 to 178 and is
incorporated into this Report by reference.
Directors
The Directors who served during the year were Jamie Pike,
Richard Gillingwater, Angela Archon, Constance Baroudel
(appointed 2nd August 2023), Peter France, Caroline
Johnstone, Jane Kingston, Olivia Qiu (stepped down 31st
January 2023), Kevin Thompson, Nicholas Anderson and
Nimesh Patel.
We have met or exceeded the Board composition requirements
of the Parker Review on ethnic diversity and the FTSE Women
Leaders Review on gender diversity on the Board.
Biographies of the Directors and details of the gender and ethnic
diversity of the Board can be found on pages 112 to 115
Spirax Group Annual Report 2023
179
Governance Report Regulatory disclosures continued
Results
The Group’s results for the year have been prepared in
accordance with the International Financial Reporting
Standards. They are set out in the Consolidated Income
Statement, which appears on page 196.
Dividend
As at 31st December 2023, the Company has distributable
reserves of £593.5 million (see the Company Statement of
Financial Position on page 249). The Directors are proposing
the payment of a final dividend of 114.0 pence (2022: 109.5
pence) which, together with the interim dividend of 46.0
pence (2022: 42.5 pence), makes a total distribution for the
year of 160.0 pence (2022: 152.0 pence). If approved at the
Annual General Meeting (AGM), the final dividend will be
paid on 24th May 2024 to shareholders on the register at
the close of business on 26th April 2024.
To this end the Board considers and, if appropriate,
authorises any conflicts, or potential conflicts of interest as
they arise and reviews any such authorisation annually.
New Directors are required to declare any conflicts and/or
potential conflicts of interest to the Board at the first Board
meeting after their appointment. The Board believes that
the procedures established to deal with conflicts of interest
are operating effectively.
Capital structure
As at 31st December 2023, the Company’s share capital
was made up of ordinary shares which each carry one vote
at general meetings of the Company. Except as set out in
the Articles of Association or in applicable legislation, there
are no restrictions on the transfer of shares in the Company
and there are no restrictions on the voting rights in the
Company’s shares.
Directors’ and Officers’ Insurance
The Company provides Directors’ and Officers’ Insurance
for Board members, Directors of the Group’s operating
companies and senior officers.
As at 29th February 2024, there were no treasury shares
held by the Company. Movements in the Company’s issued
share capital, listed on the London Stock Exchange, during
the year are set out in Note 20 on page 223.
The Company has also provided each Director with an
indemnity to the extent permitted by law in respect of the
liabilities incurred as a result of their holding office as a
Director of the Company.
Appointment, replacement and powers of Directors
Subject to the provisions of the Articles of Association, the
Directors may exercise all the powers of the Company.
The appointment and replacement of Directors is governed
by the Company’s Articles of Association, the Code, the
Companies Act 2006 and related legislation.
The Directors stand for election or re-election on an annual
basis at each AGM, in accordance with the Code.
All current Directors will seek election or re-election at the
AGM, with the exception of Nicholas Anderson who stepped
down on 16th January 2024 after ten years in the role, and
including the Chair who will, in any event, be stepping down
during 2024 after serving 10 years, as required by the Code.
The Board considers that all Directors standing for election
or re-election continue to perform effectively and
demonstrate commitment to their roles. In addition, the
Board considers that all Directors have the necessary skills
and experience, as set out in their biographies on pages 112
and 113.
Conflicts of interest
Under the Companies Act 2006 and the provisions of the
Company’s Articles of Association, the Board is required to
consider potential conflicts of interest. The Company has
established formal procedures for the disclosure and review
of any conflicts and potential conflicts of interest which the
Directors may have and for the authorisation of such
matters of conflict by the Board.
The Directors have been authorised to issue and allot
ordinary shares, pursuant to the Articles. These powers are
referred to shareholders at each AGM for renewal.
The total number of ordinary shares in issue as at 31st
December 2023 was 73,776,048.
Share capital – special rights and restrictions
Pursuant to the general provisions of the Articles and
prevailing legislation, there are no specific restrictions on
the size of a shareholding or on voting rights of holders of
ordinary shares. The Directors are not aware of any restrictions
on the transfer of ordinary shares in the Company other
than certain restrictions which may from time to time be
imposed by law and regulations, e.g. insider trading laws,
and pursuant to the Listing Rules of the Financial Conduct
Authority (FCA) whereby certain employees of the Company
require the prior approval from the Company to deal in the
Company’s securities.
The Company is not aware of any agreements entered into
between any shareholders which restrict the transfer of
shares or the exercise of any voting rights attached to the
shares. No person has any special rights of control over the
Company’s share capital and all issued shares are fully paid.
Articles of Association
The Company’s Articles of Association are available from
Companies House in the UK. They are also available on
the Company’s website. Amendments to the Articles of
Association can only be made by means of a special
resolution at a general meeting of the shareholders of
the Company.
180
Spirax Group Annual Report 2023
Governance Report Change of control
The Group’s principal borrowing facilities include change of
control provisions that could result in repayment and
cancellation of any amounts drawn.
There are provisions in the Executive Directors’ service
agreements which state that following a takeover or change
of control, if the Executive Director’s employment is terminated
then both salary/benefits and a sum in respect of lost future
bonus opportunity become payable as a lump sum.
Substantial shareholdings
The voting rights in the table below have been determined
in accordance with the requirements of the UK Listing
Authority’s Disclosure and Transparency Rules DTR 5 and
represent 3% or more of the voting rights attached to issued
shares in the Company as at 29th February 2024 (being the
latest practicable date prior to publication) and 31st
December 2023. There are no controlling founder
shareholders.
As at 31st December 2023 As at 29th February 2024
Number of
ordinary
shares
% of
issued
share
capital
Number of
ordinary
shares
% of
issued
share
capital
Substantial
shareholdings
BlackRock, Inc.
10,833,491
14.7%
10,765,407
14.6%
Impax Asset
Management
Group plc
The Vanguard
Group Inc
APG Groep N.V.
3,474,789
4.7%
3,361,599
4.6%
Fiera Groep N.V.
3,178,414
3,356,167
3,314,805
4.6%
4.5%
4.3%
3,405,055
3,343,730
3,012,499
4.6%
4.5%
4.1%
Purchase of own shares
A shareholder’s authority for the purchase by the Company
of a maximum of 10% of its own shares was in existence
during the year. However, the Company did not purchase
any of its shares during that time. This authority expires at
the forthcoming AGM and it is proposed that a similar
authority be approved.
Employee Benefit Trust (EBT)
The number of shares held in the EBT at 31st December 2023
was 139,907 for the purpose of satisfying the vesting of
awards and options granted to employees under the various
Company schemes. Dividends on shares in the EBT are waived.
Auditor
The Company’s Auditor throughout the period of this Annual
Report was Deloitte LLP, having been initially appointed on
20th May 2014 and, following an audit tender in 2022,
reappointed at the 2023 AGM.
A resolution to reappoint Deloitte LLP will be proposed at
the forthcoming AGM.
Disclosure of information to the Auditor
As at the date of the approval of this Annual Report, as
far as each Director is aware, there is no relevant audit
information of which the Company’s Auditor is unaware.
Each Director has taken all such steps as they ought to
have taken as a Director to make themselves aware of
any relevant audit information and to establish that the
Company’s Auditor is aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of Section 418 of the
Companies Act 2006.
Research and development (R&D)
The Group continues to devote significant resources to the
research, development, updating and expansion of its range
of products and solutions to remain at the forefront of its
world markets.
The R&D functions in Steam Thermal Solutions (formerly
Steam Specialties): Spirax Sarco, Cheltenham (UK) and
Gestra, Bremen (Germany); Electric Thermal Solutions:
Vulcanic, Neuilly-sur-Marne (France) and Thermocoax,
Normandy (France); and Watson-Marlow: Falmouth (UK) and
Aflex Hose, Huddersfield (UK); and the Product Development
functions in Chromalox, Pittsburgh (USA) and Durex Industries,
Cary (USA) are tasked with improving the Group’s pipeline
of new products, accelerating the time to launch, expanding
the Group’s addressable market and realising additional sales.
Further information on the expenditure on R&D is contained
in Note 6 on page 211. The amount of R&D expenditure
capitalised, and the amount amortised, in the year, are
given in Note 14 on page 218.
Treasury and foreign exchange
The Group has in place appropriate treasury policies and
procedures, which are approved by the Board. The Treasury
function manages interest rates for both borrowings and
cash deposits for the Group. It is also responsible for ensuring
there is sufficient headroom against any banking covenants
contained within its credit facilities and for ensuring there
are appropriate facilities available to meet the Group’s
strategic plans. The Group’s Treasury Policy was reviewed,
updated and approved in May 2022 by the Audit Committee
and the Board.
To mitigate and manage exchange rate risk, the Group routinely
enters into forward contracts and continues to monitor
exchange rate risk in respect of foreign currency exposures.
All these treasury policies and procedures are regularly
monitored and reviewed. It is the Group’s policy not to undertake
speculative transactions which create additional exposures
over and above those arising from normal trading activity.
Political donations
The Group has a policy of not making political donations and
no political donations were made during the year (2022: nil).
Spirax Group Annual Report 2023
181
Governance Report Regulatory disclosures continued
Diversity and inclusion
The Company captures gender and diversity data of colleagues through voluntary disclosure via the internal HR portal
where possible or direct contact where not. For the Board of Directors, we seek individual permission to share this data on
an annual basis. We do not prescribe set gender or ethnicity categories, but ask for directors to self-describe this. Further
information on how we have complied or explained our non-compliance with Financial Conduct Authority’s Listing Rules
9.8.6R(9) can be found in the Nomination Committee report on pages 132 to 137. In accordance with the Listing Rules
9.8.6R(10) the following information is also provided:
Table 1: Reporting table on gender representation
Men
Women
Not specified/prefer not to say
Table 2: Reporting table on ethnicity representation
White British or other White (including minority White groups)
Mixed/multiple ethnic groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/prefer not to say
* Group CEO, CFO, SID and Chair
Number of
Board
members
Percentage
of Board
6
4
—
60%
40%
—
Number of
Board
members
Percentage
of Board
8
—
1
1
—
—
80.0%
—
10.0%
10.0%
—
—
Number of
senior
positions
on the
Board
4
—
—
Number of
senior
positions
on the
Board *
3
—
1
—
—
—
Number in
executive
management
Percentage
of executive
management
7
2
—
77.8%
22.2%
—
Number in
executive
management
Percentage
of executive
management
8
—
1
—
—
—
88.9%
—
11.1%
—
—
—
Annual General Meeting
The Notice of Meeting convening the AGM, to be held on Wednesday 15th May 2024, and an explanation of the resolutions
sought, is set out in the Circular posted on our website and sent to shareholders in the format selected by them.
This year we are pleased to be able to hold a physical meeting and welcome our shareholders to the AGM in person. The
meeting will be held at our newly refurbished Group Headquarters at Charlton House, Cheltenham, UK.
While we are always delighted to meet with our shareholders at our AGM; all shareholders are still able to vote by submitting
a Form of Proxy, in line with the instructions set out in the Circular.
In 2023, 91.9% of the proxy votes received were lodged electronically through the CREST system.
The results of the votes will be announced to the London Stock Exchange and posted on the Group’s website,
spiraxgroup.com, shortly after the conclusion of the meeting.
For up-to-date information, please refer to our website: spiraxgroup.com/agm-notices
The Strategic Report and this Directors’ Report were approved by the Board on 6th March 2024. Pages 179 to 182 form the
Directors’ Report for the purposes of the Companies Act 2006.
By order of the Board
Andy Robson
Group General Counsel and Company Secretary
6th March 2024
Spirax-Sarco Engineering plc Registered no. 596337
182
Spirax Group Annual Report 2023
Governance Report Additional information
Disclosure
Asset values
Charitable donations
Risk management and Principal Risks
Financial instruments and financial risk management
Page(s)
Location in Annual Report
195
81
98-105
234
Consolidated Statement of Financial Position1
Strategic Report: Sustainability Report1
Strategic Report1
Note 27, Financial Statements1
Future developments of the Group’s business
48, 52, 56
Strategic Report1
Employee culture and engagement (includes employee
investment and reward)
Employee share schemes (includes Long-Term
Incentive Plans)
Health and safety and employee-related policies including
diversity and disability
63-66,
128-131
167-168,
230
62, 95
Strategic Report: Sustainability Report1 and
Colleague Engagement Report
Directors’ Remuneration Report and Note 22,
Financial Statements2
Strategic Report: Sustainability Report1
Movements in share capital
Greenhouse gas emissions
Going concern statement
Directors’ responsibility statement
Directors’ interests
198
70-74
41
184
169
Stakeholder consideration and engagement
121-123
Consolidated Statement of Changes in Equity
Strategic Report: Sustainability Report1
Strategic Report: Financial Review
Statement of Directors’ Responsibilities
Directors’ Remuneration Report
Corporate Governance Report: Section 172
Statement1
1 The Board has taken advantage of Section 414C(11) of the Act to include disclosures in the Strategic Report on these items.
2 Information required to be disclosed by LR 9.8.4R.
Spirax Group Annual Report 2023
183
Governance Report Statement of Directors’ Responsibilities
The Group navigated a challenging trading
environment in 2023 and is well positioned for a
return to growth in 2024.”
Nimesh Patel
Group Chief Executive Officer
Board of Directors
The Directors are responsible for preparing the Annual
Report and the Financial Statements in accordance with
applicable laws and regulations.
Company law requires the Directors to prepare consolidated
Group Financial Statements for each financial year in
accordance with IFRS as adopted by the UK. Parent
Company Financial Statements are prepared under FRS 101.
In addition, by law the Directors must not approve the Financial
Statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Group and Parent
Company and of their profit or loss for that period. In preparing
these Financial Statements, the Directors are required to:
• Properly select and apply accounting policies
• Present information, including accounting policies, in
a manner which is relevant, reliable, comparable and
understandable
• Provide additional disclosures when compliance with the
specific requirements in IFRS are insufficient to enable users
to understand the impact of particular transactions, other
events and conditions on the entity’s financial position
and financial performance
• Make an assessment of the Company’s ability to continue
as a going concern
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that its Financial Statements
comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Group’s website, spiraxgroup.com.
Legislation in the UK governing the preparation and
dissemination of Financial Statements may differ from
legislation in other jurisdictions.
184
Spirax Group Annual Report 2023
Cautionary statement
All statements other than statements of historical fact
included in this document, including those regarding the
financial condition, results, operations and Businesses of
Spirax-Sarco Engineering plc (its strategy, plans and
objectives), are forward-looking statements.
These forward-looking statements reflect management’s
assumptions made based on information available at this
time. They involve known and unknown risks, uncertainties
and other important factors which could cause the actual
results, performance or achievements of Spirax-Sarco
Engineering plc to be materially different from future results,
performance or achievements expressed or implied by such
forward-looking statements. Spirax-Sarco Engineering plc
and its Directors accept no liability to third parties in respect
of this Report save as would arise under English law.
Any liability to a person who has demonstrated reliance on
any untrue or misleading statement or omission shall be
determined in accordance with schedule 10A of the Financial
Services and Markets Act 2000. Schedule 10A contains limits
on the liability of the Directors of Spirax-Sarco Engineering
plc and their liability is solely to Spirax-Sarco Engineering plc.
Responsibility statement
We confirm that to the best of our knowledge:
• The Financial Statements, prepared in accordance with
IFRS as adopted by the UK, give a true and fair view of the
assets, liabilities, financial position and profit or loss of
the Company and the undertakings included in the
consolidation taken as a whole
• The Strategic Report includes a fair review of the
development and performance of the business and the
position of the Company and the undertakings included in
the consolidation taken as a whole, together with a
description of the Principal Risks and uncertainties that
they face
• The Annual Report 2023 taken as a whole, is fair, balanced
and understandable and provides the information necessary
for shareholders to assess the Company’s financial
position, performance, business model and strategy
This responsibility statement was approved by the Board of
Directors on 6th March 2024 and is signed on its behalf by:
Nimesh Patel
Group Chief Executive Officer
6th March 2024
Governance Report Financial Statements
Financial Statements
In this section
186 Independent Auditor’s Report
195 Consolidated Statement of Financial Position
196 Consolidated Income Statement
197 Consolidated Statement of Comprehensive Income
198 Consolidated Statement of Changes in Equity
199 Consolidated Statement of Cash Flows
200 Notes to the Consolidated Financial Statements
Spirax Group Annual Report 2023
185
Financial Statements Independent Auditor’s Report
To the members of Spirax-Sarco Engineering plc
Report on the audit of the Financial Statements
1. Opinion
In our opinion:
• the Financial Statements of Spirax-Sarco Engineering plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) give
a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2023 and of the
Group’s profit for the year then ended;
• the Group Financial Statements have been properly prepared in accordance with United Kingdom adopted
international accounting standards and International Financial Reporting Standards (IFRSs) as issued by the
International Accounting Standards Board (IASB);
• the Parent Company Financial Statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
• the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the Financial Statements which comprise:
• the Consolidated and Parent Company Statements of Financial Position;
• the Consolidated Income Statement;
• the Consolidated Statement of Comprehensive Income;
• the Consolidated and Parent Company Statements of Changes in Equity;
• the Consolidated Statement of Cash Flows;
• the related notes 1 to 27 to the Consolidated Financial Statements and 1 to 11 for the Parent Company Financial Statements.
The financial reporting framework that has been applied in the preparation of the Group Financial Statements is applicable
law and United Kingdom adopted international accounting standards and IFRSs as issued by the IASB. The financial
reporting framework that has been applied in the preparation of the Parent Company Financial Statements is applicable law
and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally
Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the Financial
Statements section of our report.
We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to
our audit of the Financial Statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as
applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. The non-audit services provided to the Group and Parent Company for the year are disclosed in note 6 to the
Financial Statements. We confirm that we have not provided any non-audit services prohibited by the FRC’s Ethical
Standard to the Group or the Parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• goodwill valuation for the Electric Thermal Solutions (ETS) group cash generating units (CGU);
• defined benefit pension liability valuation for certain schemes; and
• revenue recognition in relation to cut off for certain components.
Materiality
Scoping
The materiality that we used in the current year was £16.0m (2022: £17.8m) which was determined on the basis of
5% of forecast adjusted profit before tax.
We completed full scope audit work on 24 reporting entities and specified audit procedures were performed on 16
reporting entities. Our full scope and specified audit procedures covered 72% of total Group revenue and 81% of
adjusted profit before tax.
Significant changes
in our approach
In the prior year, we identified the purchase price accounting for the acquisition of Vulcanic as a key audit matter
but this has been removed given there have been no significant acquisitions for the Group during 2023.
186
Spirax Group Annual Report 2023
Financial Statements 4. Conclusions relating to going concern
In auditing the Financial Statements, we have concluded that the Directors’ use of the going concern basis of accounting in
the preparation of the Financial Statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and Parent Company’s ability to continue to adopt the going
concern basis of accounting included:
• evaluated the financing facilities available to the Group including nature of facilities, repayment terms and covenants;
• considered the business model and principal risks and uncertainties;
• challenged the assumptions used in the forecasts by reference to historical performance, trading run rate, and other
supporting evidence, such as the current macroeconomic environment;
• recalculated and assessed the amount of headroom in the forecasts (cash and covenants);
• performed a sensitivity analysis to consider specific scenarios including a reverse stress test; and
• assessed the appropriateness of the going concern disclosures in the Financial Statements
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Group’s and Parent Company’s ability to continue as a
going concern for a period of at least twelve months from when the Financial Statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to
add or draw attention to in relation to the directors’ statement in the Financial Statements about whether the directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
Financial Statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
5.1. Goodwill valuation for the Electrical Thermal Solutions (ETS) group of CGU
Key audit matter
description
The Group holds £680.5m (2022: £703.3m) of goodwill. The value of goodwill for the ETS group of CGU as at the
balance sheet date was £494.7m (2022: £514.9m). Management performs an impairment review of the carrying
value of each CGU on an annual basis in line with the requirements of IAS 36. The impairment assessment
involves judgement in considering whether the carrying value of the CGU is recoverable.
There is a high level of judgement surrounding the valuation of goodwill due to the significant growth anticipated
in management forecasts. Key judgements include assumptions in estimating future revenue and earnings before
interest and tax (EBIT) margins in the short term (2024-2028), alongside setting an appropriate discount rate. We
have identified a key audit due to sensitivity of these assumptions.
The Audit Committee Report on page 138 refers to impairment of goodwill and other intangibles as an area
considered by the Audit Committee. Note 1 to the Consolidated Financial Statements sets out the Group’s
accounting policy for testing of goodwill for impairment. The basis for the impairment reviews is outlined in Note
14 to the Consolidated Financial Statements, including details of the discount rates and growth rates used. Note
14 to the Consolidated Financial Statements also includes details of the extent to which the CGU to which the
goodwill and other intangible assets are allocated are sensitive to changes in the key inputs.
Spirax Group Annual Report 2023
187
Financial Statements Independent Auditor’s Report continued
How the scope
of our audit
responded to the
key audit matter
In response to the key audit matter identified, we performed the following procedures:
• obtained an understanding and assessed relevant controls relating to the goodwill impairment review process;
• assessed the integrity of management’s impairment model through testing of the mechanical accuracy and
evaluating the application of the input assumptions;
• assessed the revenue and EBIT growth assumptions, held meetings with finance and commercial management
and visited two facilities within the ETS Business (Ogden and Durex Industries) to challenge and understand the
growth assumptions within the impairment model;
• considered external evidence, such as forecast IP and GDP growth, market reports and order intake, to assess
accuracy and reasonableness of management’s forecasts;
• compared the change in model assumptions from 2022 and understood the driver of any variances;
• evaluated historical forecasting accuracy by comparing prior year plans to actual results achieved;
• with the involvement from our internal valuations specialist, we assessed the discount rate used utilising their
knowledge and expertise;
• performed a sensitivity analysis on the assumptions used within the model;
• completed a stand back review by evaluating the reasonableness of the assumptions in aggregate, by
comparing the EBIT multiple of ETS to the EBIT multiple of the Group and enterprise value to the value in use;
and
• assessed the appropriateness of the related disclosures.
Key observations
From the work performed above we are satisfied that the value in use used in the goodwill impairment review for
the ETS Group of CGUs supports the carrying value. This was on the basis that the key assumptions, applied,
when taken in aggregate, are within our acceptable range. We consider the related disclosures to be appropriate.
5.2. Defined benefit pension liability valuation for certain schemes
Key audit matter
description
How the scope
of our audit
responded to the
key audit matter
At 31st December 2023 the gross retirement benefit liability recognised in the Consolidated Statement of
Financial Position was £388.9m (2022: £393.7m). There is a risk of material misstatement relating to the
judgements made by management in valuing the defined benefit pension liabilities including the use of key model
input assumptions specifically the discount rates, mortality assumptions and inflation rates over the four main
schemes (three in the UK and one in the USA). These variables can have a material impact in calculating the
quantum of the retirement benefit liability. Management involved third party actuaries to complete valuations of
the pension liabilities.
Refer to Note 1 for the Group’s policy on defined benefit plans and post-retirement benefit key sources of
estimation uncertainty, Note 22 for the financial disclosure including the key estimates and assumptions used in
the defined benefit pension plan valuation and the significant issues section of the Audit Committee Report on
page 144.
We have obtained an understanding and assessed relevant controls relating to the pensions cycle.
We involved our internal actuarial specialists to assess key assumptions applied in determining the pension
obligations for the four main pension schemes, and determined whether the key assumptions are reasonable.
Testing covered 93.6% (2022: 93.9%) of defined benefit pension liabilities and is explained in more detail below.
For each of the four schemes, we challenged management’s key assumptions by reference to illustrative
benchmark rates, sensitising any difference between management’s rates and the illustrative benchmark rates.
Additionally, we benchmarked the key assumptions against other listed companies to check for any outliers in the
data used.
We also evaluated the management expert’s competence, capabilities and objectivity and assessed their reports
considering compliance with IAS 19 and IFRIC 14 and have considered the appropriateness of the related
disclosures.
Key observations
From the work performed, we are satisfied that the valuation of the defined benefit pension liability is appropriate
and the key assumptions applied in respect of the valuation of the schemes’ liabilities are reasonable.
188
Spirax Group Annual Report 2023
Financial Statements 5. Key audit matters continued
5.3. Revenue recognition in relation to cut off for certain components
Key audit matter
description
The Group policy is to recognise revenue when performance obligations have been fulfilled which, in the majority
of cases, is at time of dispatch (‘ex works’) or at time of delivery (‘FOB’). We have identified a key audit matter
relating to a risk of material misstatement due to fraud in relation to cut off for revenue recognition.
In particular, we have identified a risk on revenue in components where external revenue recognised in December
2023 is both above the component’s materiality and contributes a higher proportion (10% or more) of annual
external revenue compared to the rest of the year. The risk for these components focuses on the recognition of
revenue by reference to the contracted shipping terms and meeting the performance obligations for product
despatches and deliveries spanning year end.
Refer to Note 1 for the Group’s revenue recognition policy and the significant issues section of the Audit
Committee Report on page 144.
How the scope
of our audit
responded to the
key audit matter
Our audit response at the relevant components consisted of several procedures including:
• obtained an understanding and assessed relevant controls relating to the revenue cycle;
• evaluated the product despatch cycle and revenue recognition profile across the year-end period;
• evaluated a sample of items by assessing whether the performance obligation was met in line with the revenue
recognition date in accordance with the terms of trade with customers; and
• assessed the appropriateness of the related disclosures.
Key observations
From the procedures performed above, we consider that revenue across the Group has been appropriately
recognised and that the year-end cut off is materially accurate.
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the Financial Statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:
Materiality
Basis for
determining
materiality
Rationale for the
benchmark applied
Group Financial Statements
£16.0m (2022: £17.8m)
Parent Company Financial Statements
£5.6m (2022: £6.2m)
We determined materiality on the basis of 5% of
forecasted adjusted profit before tax (2022: 5% of
forecast adjusted profit before tax), this represents
5.2% of final adjusted profit before tax, as defined in the
Alternative Performance Measures appendix.
We have used adjusted profit before tax for determining
materiality. This is considered to be a key benchmark as
this metric is important to the users of the Financial
Statements (investors and analysts being the key users
for a listed entity) because it portrays the performance
of the business and hence its ability to pay a return on
investment to the investors.
Parent Company materiality is set at 3% of net assets
(2022: 3% of net assets), which is capped at 50% of the
Group performance materiality. This is consistent with
prior year.
We have considered net assets as the appropriate
measure given the Parent Company is primarily a
holding Company for the Group.
Adjusted PBT
£309m
Adjusted PBT
Group materiality
Group materiality
£16.0m
Component
materiality range
£4.5m to £5.6m
Audit Committee
reporting threshold
£0.8m
Spirax Group Annual Report 2023
189
Financial Statements Independent Auditor’s Report continued
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the Financial Statements as a whole.
Performance
materiality
Basis and rationale
for determining
performance
materiality
Group Financial Statements
Parent Company Financial Statements
70% (2022: 70%) of Group materiality
70% (2022: 70%) of Parent Company materiality
In determining performance materiality, we considered our risk assessment, including our assessment of the
Group’s overall control environment and the level of corrected and uncorrected misstatements identified in previous
audits. We have also considered changes in key management personnel of the Group.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £800,000
(2022: £890,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of
the Financial Statements.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide
controls, and assessing the risks of material misstatement at the Group level. Based on that assessment, we focused our
Group audit scope primarily on the audit work at 40 components (2022: 34 components). 24 (2022: 24) of these were
subject to a full audit, whilst the remaining 16 components (2022: 10 components) were subject to specified audit
procedures where the extent of our testing was based on our assessment of the risks of material misstatement and of the
materiality of the Group’s operations at those components. These components represent the principal business units and
account for 72% (2022: 73%) of the Group’s revenue and 81% (2022: 85%) of the adjusted profit before tax. They were also
selected to provide an appropriate basis for undertaking audit work to address the risks of material misstatement identified
above. Our Group audit scoping remained consistent with prior year, except for changes made to reflect the material
contribution from the Vulcanic and Durex Industries acquisitions which ensured that we maintained our overall coverage,
particularly within the ETS division. The Parent Company is located in the UK and is audited directly by the Group audit
team. Our work on the components, including the Parent Company, was executed at levels of materiality applicable to each
individual component, which were lower than Group materiality and ranged from £4.5m to £5.6m (2022: £5.0m to £6.2m).
At the Parent Company level, we also tested the consolidation process and carried out analytical procedures to confirm our
conclusion that there were no significant risks of material misstatement of the aggregated financial information of the
remaining components not subject to audit or audit of specified account balances.
28%
13%
19%
3%
Revenue
Profit before tax
59%
78%
Full audit scope
Full audit scope
Specified audit procedures
Specified audit procedures
Review at group level
Review at group level
190
Spirax Group Annual Report 2023
Financial Statements 7. An overview of the scope of our audit continued
7.2. Our consideration of the control environment
The Group operates a range of IT systems which underpin the financial reporting processes. This can vary by geography
and/or reporting entity. For certain components subject to full scope audits, we identified relevant IT systems for the
purpose of our audit work. These were typically the principal Enterprise Resource Planning (ERP) systems for each relevant
component that govern the general ledger and transaction accounting balances and also included the Group’s consolidation
system. Our approach was principally designed to inform our risk assessment and, as such, with the involvement of our IT
specialists we obtained an understanding of relevant IT controls and tested the general IT controls for some operating entities.
In the current year we did not plan to rely on the operating effectiveness of controls (automated or otherwise). This strategy
reflected our historical knowledge of the: disaggregated nature of the control environment, which brings inherent
segregation of duty challenges in certain smaller businesses; limited formality of the control environment specifically around
retention of evidence of a control’s operation sufficient for testing purposes; and our understanding of the Group’s business
transformation programme to upgrade legacy systems, including gaps in associated user access and change management
controls. This understanding was reconfirmed in the current year and was factored into our planned audit approach and risk
assessment.
The Group-wide G3 programme seeks to enhance the internal control framework and has both IT and business control
aspects that span multi-years. Therefore, in addition to the audit work on IT controls described above, additional audit work
on controls was limited to obtaining an understanding of the relevant controls in key financial reporting process cycles to
inform our risk assessment.
The Group continues to invest time in responding to and addressing our observations on IT and entity level controls.
Management determines their response to these observations and continues to monitor their resolution with reporting to
and oversight from the Audit Committee as explained in the Audit Committee report on page 138, which includes
consideration of developments in control in the context of the recent FRC guidance and changes to the Combined Code. As
management develops and completes the business transformation project, we expect our audit approach to evolve in future
years alongside these developments in the internal control environment.
7.3. Our consideration of climate-related risks
In planning our audit, we have considered the potential impact of climate change on the Group’s business and its Financial Statements.
The Group has assessed the risk and opportunities relevant to climate change which has been included as an emerging risk
across the Group. This risk has also been considered and embedded into the businesses as explained in the Strategic
Report on page 99.
As a part of our audit procedures, we have obtained management’s risk register and held discussions with those charged
with governance to understand the process of identifying climate-related risks, the determination of mitigating actions and
the impact on the Group’s Financial Statements. While management has acknowledged that the transition and physical risks
posed by climate change have the potential to impact the medium to long term success of the business, they have assessed
that there is no material impact arising from climate change on the judgements and estimates determining the valuations
within the Financial Statements as at 31 December 2023 as explained in Note 1.
We performed our own qualitative risk assessment of the potential impact of climate change on the Group’s account
balances and classes of transaction, and did not identify any additional risks of material misstatement. We have also
evaluated the appropriateness of disclosures included in the Financial Statements and read climate-related disclosures
included in the Strategic Report to consider whether they are materially consistent with the disclosures made in Financial
Statements and our knowledge obtained in the audit.
7.4. Working with other auditors
The Group audit was conducted exclusively by a global network of Deloitte member firms under the direction and
supervision of the UK Group audit team. Dedicated members of the Group audit team were assigned to each component to
facilitate an effective and consistent approach to component oversight. We reviewed the work performed by component
teams and discussed the results with them. We maintained regular communication between the Group and component
teams and remote access to relevant documents was provided.
8. Other information
The other information comprises the information included in the annual report, other than the Financial Statements and our
auditor’s report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the Financial Statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the Financial Statements or our knowledge obtained in the course of the audit, or otherwise appears to be
materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this
gives rise to a material misstatement in the Financial Statements themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Spirax Group Annual Report 2023
191
Financial Statements Independent Auditor’s Report continued
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the
Financial Statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether
due to fraud or error.
In preparing the Financial Statements, the directors are responsible for assessing the Group’s and the Parent Company’s
ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group and the Parent Company or to cease
operations, or have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these Financial Statements.
A further description of our responsibilities for the audit of the Financial Statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance
with laws and regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance including the design of the Group’s
remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;
• Group’s own assessment of the risks that irregularities may occur either as a result of fraud or error that was approved by
the board on 6 March 2024;
• results of our enquiries of management, internal audit, the Directors and the Audit Committee about their own
identification and assessment of the risks of irregularities, including those that are specific to the Group’s sector;
• any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures
relating to:
• identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of
non-compliance;
• detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged
fraud;
• the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
• the matters discussed among the audit engagement team including significant component audit teams and relevant
internal specialists, including tax, valuations, pensions and IT specialists regarding how and where fraud might occur in
the Financial Statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for
fraud and identified the greatest potential for fraud in the following areas: revenue recognition in relation to cut-off for
certain components. In common with all audits under ISAs (UK), we are also required to perform specific procedures to
respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on
provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in
the Financial Statements. The key laws and regulations we considered in this context included the Companies Act, Listing
Rules, pensions legislation and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the Financial
Statements but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty.
192
Spirax Group Annual Report 2023
Financial Statements 11. Extent to which the audit was considered capable of detecting irregularities, including fraud continued
11.2. Audit response to risks identified
As a result of performing the above, we identified revenue recognition in relation to cut-off for certain components as a key
audit matter related to the potential risk of fraud. The key audit matters section of our report explains the matter in more
detail and also describes the specific procedures we performed in response to that key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the Financial Statement disclosures and testing to supporting documentation to assess compliance with
provisions of relevant laws and regulations described as having a direct effect on the Financial Statements;
• enquiring of management, the audit committee and in-house legal counsel concerning actual and potential litigation and
claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing
correspondence with HMRC; and
• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries
and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a
potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal
course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members
including internal specialist and significant component audit teams, and remained alert to any indications of fraud or
non-compliance with laws and regulations throughout the audit.
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the Financial
Statements are prepared is consistent with the Financial Statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in
the course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
13. Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that
part of the Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate
Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the Financial Statements and our knowledge obtained during the audit:
• the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and
any material uncertainties identified set out on page 41;
• the directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why
the period is appropriate set out on page 42;
• the directors’ statement on fair, balanced and understandable set out on page 108;
• the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on
page 152;
• the section of the annual report that describes the review of effectiveness of risk management and internal control
systems set out on pages 152 and 153; and
• the section describing the work of the Audit Committee set out on page 138.
Spirax Group Annual Report 2023
193
Financial Statements Independent Auditor’s Report continued
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the Parent Company Financial Statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration
have not been made or the part of the directors’ remuneration report to be audited is not in agreement with the accounting
records and returns.
We have nothing to report in respect of these matters.
15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by the Directors and subsequently at the Annual
General Meeting on 11 May 2014 to audit the Financial Statements for the year ending 31 December 2014 and subsequent
financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm
is 10 years, covering the years ending 31 December 2014 to 31 December 2023.
15.2. Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance
with ISAs (UK).
16. Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.15R – DTR
4.1.18R, these Financial Statements will form part of the Electronic Format Annual Financial Report filed on the National
Storage Mechanism of the FCA in accordance with DTR 4.1.15R – DTR 4.1.18R. This auditor’s report provides no assurance
over whether the Electronic Format Annual Financial Report has been prepared in compliance with DTR 4.1.15R – DTR
4.1.18R.
Andrew Bond, FCA
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
6 March 2024
194
Spirax Group Annual Report 2023
Financial Statements Consolidated Statement of Financial Position
at 31st December 2023
Notes
2023
£m
2022
£m
Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill
Other intangible assets
Prepayments
Investment in Associate
Taxation recoverable
Deferred tax assets
Current assets
Inventories
Trade receivables
Other current assets
Taxation recoverable
Cash and cash equivalents
Total assets
Equity and liabilities
Current liabilities
Trade and other payables
Provisions
Bank overdrafts
Current portion of long-term borrowings
Short-term lease liabilities
Current tax payable
Net current assets
Non-current liabilities
Long-term borrowings
Long-term lease liabilities
Deferred tax liabilities
Post-retirement benefits
Provisions
Long-term payables
Total liabilities
Net assets
Equity
Share capital
Share premium account
Translation reserve
Other reserves
Retained earnings
Equity shareholders’ funds
Non-controlling interest
Total equity
Total equity and liabilities
12
13
14
14
11
15
16
27
17
23
18
19
23
23
23
23
23
15
22
19
415.1
98.4
680.5
448.8
1.9
3.0
4.9
31.0
384.5
67.2
703.3
500.3
2.0
—
5.1
69.0
1,683.6
1,731.4
285.2
299.8
71.4
8.7
359.7
290.0
341.1
79.6
13.9
328.9
1,024.8
1,053.5
2,708.4
2,784.9
251.2
9.5
146.9
3.6
14.5
28.3
454.0
570.8
875.9
82.2
68.2
51.4
7.6
11.4
1,096.7
1,550.7
2
1,157.7
20
20
20
19.8
90.1
(60.4)
(12.9)
1,120.3
1,156.9
0.8
283.0
12.0
85.1
202.9
14.1
40.4
637.5
416.0
731.3
51.1
128.1
52.1
6.2
8.8
977.6
1,615.1
1,169.8
19.8
88.1
17.5
(23.4)
1,067.0
1,169.0
0.8
1,157.7
1,169.8
2,708.4
2,784.9
These Financial Statements of Spirax-Sarco Engineering plc, company number 00596337, were approved by the Board of
Directors and authorised for issue on 6th March 2024 and signed on its behalf by:
N.B. Patel
Director
Spirax Group Annual Report 2023
195
Financial Statements Consolidated Income Statement
for the year ended 31st December 2023
Revenue
Operating costs
Operating profit
Financial expenses
Financial income
Net financing expense
Share of profit/(loss) of Associate
Profit before taxation
Taxation
Profit for the year
Attributable to:
Equity shareholders
Non-controlling interest
Profit for the year
Earnings per share
Basic earnings per share
Diluted earnings per share
Dividends
Dividends per share
Dividends paid during the year (per share)
The Notes on pages 200 to 239 form an integral part of the Financial Statements.
Notes
2023
£m
2022
£m
2
3
2
2, 5
11
6
8
9
10
1,682.6
1,610.6
(1,398.2)
(1,291.8)
284.4
(51.2)
11.3
(39.9)
—
244.5
(60.5)
184.0
183.6
0.4
184.0
318.8
(16.3)
5.6
(10.7)
—
308.1
(83.1)
225.0
224.7
0.3
225.0
249.5p
248.9p
305.1p
304.4p
160.0p
155.5p
152.0p
140.0p
196
Spirax Group Annual Report 2023
Financial Statements Consolidated Statement of Comprehensive Income
for the year ended 31st December 2023
Profit for the year
Items that will not be reclassified to profit or loss:
Remeasurement loss on post-retirement benefits
Deferred tax on remeasurement loss on post-retirement benefits
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation and net investment hedges (loss)/gain
Transfer to Consolidated Income Statement of cumulative translation differences on disposal of
subsidiaries
Gain/(loss) on cash flow hedges net of tax
Total comprehensive income for the year
Attributable to:
Equity shareholders
Non-controlling interest
Total comprehensive income for the year
Notes
2023
£m
184.0
2022
£m
225.0
22
22
20
26
20, 27
(3.8)
1.1
(2.7)
(8.3)
1.8
(6.5)
(77.9)
54.8
—
5.0
(72.9)
108.4
108.0
0.4
108.4
3.2
(3.5)
54.5
273.0
272.7
0.3
273.0
Consolidated Statement of Changes in Equity
for the year ended 31st December 2023
Balance at 1st January 2023
Profit for the year
Other comprehensive (expense)/
income:
Foreign exchange translation and net
investment hedges loss*
Remeasurement loss on post-retirement
benefits
Deferred tax on remeasurement loss on
post-retirement benefits
Gain on cash flow hedges net of tax*
Total other comprehensive (expense)/
income for the year
Total comprehensive (expense)/
income for the year
Contributions by and distributions
to owners of the Company:
Dividends paid
Equity settled share plans net of tax
Issue of share capital
Employee Benefit Trust shares
Notes
20
22
15, 22
20, 27
10
20
20
Share
capital
£m
19.8
—
Share
premium
account
£m
88.1
—
Translation
reserve
£m
Other
reserves
£m
Retained
earnings
£m
Equity
shareholders’
funds
£m
Non-
controlling
interest
£m
Total
equity
£m
17.5
—
(23.4)
1,067.0
—
183.6
1,169.0
183.6
0.8
0.4
1,169.8
184.0
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2.0
—
(77.9)
—
—
—
(77.9)
—
—
—
5.0
5.0
—
(77.9)
(3.8)
(3.8)
1.1
—
1.1
5.0
(2.7)
(75.6)
—
—
—
—
—
(77.9)
(3.8)
1.1
5.0
(75.6)
(77.9)
5.0
180.9
108.0
0.4
108.4
—
—
—
—
—
—
—
5.5
(114.5)
(13.1)
—
—
(114.5)
(0.4)
(114.9)
(13.1)
2.0
5.5
—
—
—
(13.1)
2.0
5.5
Balance at 31st December 2023
19.8
90.1
(60.4)
(12.9)
1,120.3
1,156.9
0.8
1,157.7
* During the year, there has been a reclassification in relation to prior year deferred tax on cash flow hedges of £0.9m
Other reserves represent the Group’s cash flow hedges, capital redemption and Employee Benefit Trust reserves (see Note
20). The non-controlling interest is a 2.5% share of Spirax Sarco Korea Ltd.
Spirax Group Annual Report 2023
197
Financial Statements Consolidated Statement of Changes in Equity
for the year ended 31st December 2022
Balance at 1st January 2022
Profit for the year
Other comprehensive income/
(expense):
Foreign exchange translation and net
investment hedges gain
Transfer to Consolidated Income
Statement of cumulative translation
differences on disposal of subsidiaries
Remeasurement loss on post-retirement
benefits
Deferred tax on remeasurement loss on
post-retirement benefits
Loss on cash flow hedges net of tax
Total other comprehensive income/
(expense) for the year
Total comprehensive income/
(expense) for the year
Contributions by and distributions to
owners of the Company:
Dividends paid
Equity settled share plans net of tax
Issue of share capital
Employee Benefit Trust shares
Notes
20
20,26
22
15,22
20,27
10
20
20
Share
capital
£m
19.8
—
Share
premium
account
£m
86.3
—
Translation
reserve
£m
Other
reserves
£m
(40.5)
(17.7)
—
—
Retained
earnings
£m
961.1
224.7
Equity
shareholders’
funds
£m
Non-
controlling
interest
£m
1,009.0
224.7
1.0
0.3
Total
equity
£m
1,010.0
225.0
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1.8
—
54.8
3.2
—
—
—
—
—
—
—
(3.5)
—
—
54.8
3.2
(8.3)
(8.3)
1.8
—
1.8
(3.5)
58.0
(3.5)
(6.5)
48.0
—
—
—
—
—
—
54.8
3.2
(8.3)
1.8
(3.5)
48.0
58.0
(3.5)
218.2
272.7
0.3
273.0
—
—
—
—
—
—
—
(2.2)
(103.1)
(9.2)
—
—
(103.1)
(0.5)
(103.6)
(9.2)
1.8
(2.2)
—
—
—
(9.2)
1.8
(2.2)
Balance at 31st December 2022
19.8
88.1
17.5
(23.4)
1,067.0
1,169.0
0.8
1,169.8
198
Spirax Group Annual Report 2023
Financial Statements Consolidated Statement of Cash Flows
for the year ended 31st December 2023
Cash flows from operating activities
Profit before taxation
Depreciation, amortisation and impairment
Loss/(profit) on disposal of property, plant and equipment
Cash payments to the pension schemes greater than the charge to operating profit
(Profit)/loss on disposal of businesses
Acquisition-related costs
Restructuring-related provisions and current asset impairments
Equity settled share plans
Net financing expense
Notes
2,3
6
22
22
5
2023
£m
244.5
112.7
0.1
(5.7)
(0.4)
4.3
(3.0)
6.1
39.9
2022
£m
308.1
81.0
(1.4)
(5.3)
7.0
3.8
10.2
8.9
10.7
Operating cash flow before changes in working capital and provisions
398.5
423.0
Decrease/(increase) in trade and other receivables
(Increase)/decrease in inventories
Increase/(decrease) in provisions
(Decrease)/increase in trade and other payables
Cash generated from operations
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sale of non-current assets
Purchase of software and other intangibles
Development expenditure capitalised
Disposal of businesses
Acquisition of businesses net of cash acquired
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Employee Benefit Trust share purchase
Repaid borrowings
New borrowings
Interest paid and interest on lease liabilities
Repayment of lease liabilities
Dividends paid (including minorities)
Net cash used in financing activities
Net change in cash and cash equivalents
Net cash and cash equivalents at beginning of the year
Exchange movement
Net cash and cash equivalents at end of the year
Borrowings
Net debt at end of the year
Lease liabilities
Net debt including lease liabilities at end of the year
12.6
(13.1)
2.9
(11.6)
389.3
(90.7)
298.6
(56.3)
(58.3)
(0.8)
23.5
331.1
(90.0)
241.1
(84.0)
(104.3)
3.1
(14.2)
(7.2)
0.5
(5.2)
11.3
4.0
(8.9)
(4.3)
(2.8)
(460.3)
5.6
(95.7)
(571.0)
2.0
(12.8)
(221.1)
1.8
(20.8)
(511.1)
192.8
1,008.8
(49.1)
(16.1)
(15.5)
(12.9)
(114.9)
(103.6)
(219.2)
(16.3)
243.8
(14.7)
212.8
346.7
16.8
219.0
8.0
243.8
(879.5)
(934.2)
(666.7)
(690.4)
(96.7)
(65.2)
(763.4)
(755.6)
12
14
14
25
5
20
23
23
5
23
23
23
23
23
23
23
23
23
Spirax Group Annual Report 2023
199
Financial Statements Notes to the Consolidated Financial Statements
1 Accounting policies
Basis of preparation
The Consolidated Financial Statements have been prepared on a historical cost basis except for items that are required by
International Financial Reporting Standards (IFRS) to be measured at fair value, principally certain financial instruments. The
Consolidated Financial Statements have been prepared in accordance with IFRS which includes the standards and interpretations
issued by the International Accounting Standards Board (IASB) that have been adopted by the United Kingdom (UK).
The preparation of Financial Statements in conformity with IFRS requires the Directors to apply IAS 1 and make judgements,
estimates and assumptions about the carrying amounts of assets and liabilities that are not apparent from other sources.
The estimates and associated assumptions are based on historical experiences and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
Critical judgements in applying the Group’s accounting policies
The Directors have concluded that no critical judgements, apart from those involving estimations (which are dealt with
separately below) have been made in the process of applying the Group’s accounting policies.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty in the reporting period that
may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year, are outlined below.
(i) Post-retirement benefits
The Group’s defined benefit obligation is assessed by selecting key assumptions. The selection of mortality rates
and inflation are key sources of estimation uncertainty which could lead to material adjustment in the defined benefit
obligation within the next financial year. These assumptions are set with close reference to market conditions.
The Group’s defined benefit obligation is discounted at a rate set by reference to market yields at the end of the
reporting period on high quality corporate bonds. The most significant criteria considered for the selection of bonds
include the issue size of the corporate bonds, the quality of the bonds and the identification of outliers which
are excluded.
The assumptions selected and associated sensitivity analysis are disclosed in Note 22.
Climate change
Climate change is a global challenge and an emerging risk to businesses, people and the environment across the world. We
have a role to play in limiting global warming by improving our energy management, reducing our carbon emissions and
helping our customers do the same. Growing awareness of climate change and customer sustainability targets will provide
impetus for business growth as we provide products, services and solutions that increase efficiency and reduce customers’
energy use and carbon emissions.
In preparing the Consolidated Financial Statements, the Directors have considered the impact of climate change,
particularly in the context of risk identified in the TCFD disclosures on pages 84-91. There has been no material impact
identified on the financial reporting judgments and estimates. In particular, the Directors have considered the impact of
climate change in respect of the following areas:
• Assessment of impairment of goodwill, other intangibles and tangible assets
• Going Concern and viability statements
• Impact on useful economic lives on assets
• Preparation of budgets and cash flow forecasts
Given no material risks have been identified as per the assessment outlined in the TCFD report, no climate change related
impact was identified. The Directors are, however, aware of the changing nature of risks associated with climate change and
will regularly assess these risks against judgements and estimates made in the preparation of the Group’s Financial Statements.
200
Spirax Group Annual Report 2023
Financial Statements 1 Accounting policies continued
Basis of preparation continued
The Group has considerable financial resources together with a diverse range of products and customers across wide
geographic areas and industries. As a consequence, the Directors believe that the Group is well placed to manage its
business risks successfully.
Further information on the Group’s business activities, performance and position, together with the financial position of
the Group, its capital structure and cash flow are included in the Strategic Report from the inside front cover to page 105.
In addition, Note 27 to the Financial Statements discloses details of the Group’s financial risk management and
credit facilities.
The Consolidated Financial Statements are presented in pounds sterling, which is the Company’s functional currency,
rounded to the nearest one hundred thousand.
New standards and interpretations applied in the current year
During the current year, the Group has applied the following amendments to IFRS Standards and Interpretations issued by
the International Accounting Standards Board (IASB) effective for annual periods that begin on or after 1st January 2023.
Adoption has not had a material impact on the disclosures or on the amounts reported in these Financial Statements:
• IFRS 17 Insurance Contracts
• Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements:
Disclosure of Accounting Policies
• Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (see
Note 15 for further details)
• Amendments to IAS 12 Income Taxes: International Tax Reform – Pillar Two Model Rules
• Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates
The economies in Argentina and Turkey are subject to high inflation. IAS 29 (Financial Reporting in Hyperinflationary
Economies) requires the following application:
• Adjustment of historical cost non-monetary assets and liabilities for the change in purchasing power caused by inflation
from the date of initial recognition to the balance sheet date;
• Adjustment of the Consolidated Income Statement for inflation during the period; and
• Translation of the Consolidated Income Statement at the period-end foreign exchange rate instead of an average rate.
At 31st December 2023 the Group have performed a review of the impact of the application of IAS 29 and concluded that
the adoption of IAS 29 is not required as its impact on the Consolidated Financial Statements is not material. The Group will
continue to monitor and assess this position going forward.
New standards and interpretations not yet applied
At the date of authorisation of these Financial Statements, the Group has not applied the following new and revised
IFRS Standards that have been issued but are not yet effective:
• Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
• Amendments to IAS 1: Classification of Liabilities as Current or Non-current
• Amendments to IAS 1: Non-current Liabilities with Covenants
• Amendments to IAS 7 and IFRS 7: Supplier Finance Arrangements
• Amendments to IFRS 16: Lease Liability in a Sale and Leaseback
The Directors do not expect that the adoption of the Standards listed above will have a material impact on the Financial
Statements of the Group in future periods.
Basis of accounting
(i) Subsidiaries
The Group Consolidated Financial Statements include the results of the Company and all its subsidiary undertakings.
Subsidiaries are entities controlled by the Group. Control is achieved when the Group has power over an entity, is
exposed, or has rights, to variable returns from its involvement with the entity and has the ability to use its power to
affect those returns. In assessing control, potential voting rights that presently are exercisable or convertible are taken
into account. The Financial Statements of subsidiaries are included in the Consolidated Financial Statements from the
date that control commences until the date that control ceases.
(ii) Associates
Associates are those entities for which the Group has significant influence, but not control, over the financial and
operating policies. The Financial Statements include the Group’s share of the total recognised income and expense of
Associates on an equity accounted basis, from the date that significant influence commenced until the date that
significant influence ceases.
Spirax Group Annual Report 2023
201
Financial Statements 1 Accounting policies continued
Basis of accounting continued
(iii) Transactions eliminated on consolidation
Intra-Group balances, and any unrealised gains and losses or income and expenses arising from intra-Group
transactions, are eliminated in preparing the Group Consolidated Financial Statements. Unrealised gains arising from
transactions with Associates are eliminated to the extent of the Group’s interest in the entity.
Foreign currency
(i) On consolidation
The assets and liabilities of foreign operations are translated into sterling at exchange rates ruling at the date of the
Consolidated Statement of Financial Position (closing rate). The revenues, expenses and cash flows of foreign
operations are translated into sterling at average rates of exchange ruling during the year. Where the Notes to the Group
Consolidated Financial Statements include tables reconciling movements between opening and closing balances,
opening and closing assets and liabilities are translated at closing rates and revenue, expenses and all other movements
are translated at average rates, with the exchange differences arising being disclosed separately.
Exchange differences arising from the translation of the assets and liabilities of foreign operations are taken to a
separate translation reserve within equity. They are recycled and recognised in the Consolidated Income Statement
upon disposal of the operation. Any differences that have arisen before 1st January 2004, the date of transition to IFRS,
are not presented as a separate component of equity.
(ii) Foreign currency transactions
Transactions in foreign currencies are translated to the respective currencies of the Group entities at the foreign
exchange rate at the date of the transaction. Monetary assets and liabilities at the date of the Statement of Financial
Position denominated in a currency other than the functional currency of the entity are translated at the foreign
exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the
Consolidated Income Statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a
foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and
liabilities denominated in foreign currencies that are stated at fair value are translated at foreign exchange rates ruling at
the dates fair value was determined.
Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a highly probable
forecasted transaction, the effective part of any gain or loss on the derivative financial instrument is recognised in other
comprehensive income and presented in the cash flow hedges reserve. The associated gain or loss is removed from equity
and recognised in the Consolidated Income Statement in the period in which the transaction to which it relates occurs.
Net investment hedge accounting
The Group uses foreign currency denominated borrowings as a hedge against translation exposure on the Group’s net
investment in overseas companies. Where the hedge is fully effective at hedging, the variability in the net assets of such
companies caused by changes in exchange rates and the changes in value of the borrowings are recognised in the
Consolidated Statement of Comprehensive Income and accumulated in the net investment hedge reserve. The ineffective
part of any changes in value caused by changes in exchange rates is recognised in the Consolidated Income Statement.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at the fair value of consideration received, less directly attributable
transaction costs. Subsequent to initial recognition, interest-bearing borrowings are measured at amortised cost with any
difference between cost and redemption value being recognised in the Consolidated Income Statement over the period of
the borrowings on an effective interest basis.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial
liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense
recognised on an effective interest basis. The effective interest method is a method of calculating the amortised cost of the
financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate,
a shorter period, to the net carrying amount on initial recognition.
The Group has not participated in any supplier financing arrangements during the current or prior year.
202
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 1 Accounting policies continued
Property, plant and equipment
Items of property, plant and equipment are stated at cost or deemed cost, less accumulated depreciation. Depreciation is
charged to the Consolidated Income Statement on a straight-line basis at rates which write down the value of assets to their
residual values over their estimated useful lives. Land is not depreciated.
The annual principal rates are as follows:
Freehold buildings
Leasehold buildings
Plant and machinery
Office furniture and fittings
Office equipment
Motor vehicles
Tooling and patterns
1.5–4.0%
Over life of lease
6.66–10%
10%
12.5–33.3%
20%
10%
The depreciation rates are reassessed annually.
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method of accounting. Identified assets
acquired and liabilities assumed are measured at their respective acquisition date fair values. The excess of the fair value of
the consideration given over the fair value of the identifiable net assets acquired is recorded as goodwill. Acquisition-
related costs are expensed as incurred. The operating results of the acquired business are reflected in the Group’s
Consolidated Financial Statements after the date of acquisition.
The cost of the acquisition is measured as the cash paid and also includes the fair value of any asset or liability resulting
from a contingent consideration arrangement at the acquisition date.
Intangible assets
(i) Goodwill
Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets
acquired. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating
units and is not amortised but is tested annually for impairment (see Note 14 for more detail). Annual impairment tests
are performed on goodwill by comparing the carrying value with the recoverable amount, being the higher of the fair
value less cost to sell and value in use, discounted at an appropriate discount rate, of future cash flows in respect of
goodwill for the relevant cash-generating unit.
(ii) Research and development
Expenditure on R&D is charged to the Consolidated Income Statement in the period in which it is incurred except when
development expenditure is capitalised where the development costs meet certain distinct criteria for capitalisation.
These criteria include demonstration of the technical feasibility, intent of completing a new intangible asset that is
separable, the ability to measure reliably the expenditure attributable to the intangible asset during its development
phase and that the asset will generate probable future economic benefits. The expenditure capitalised includes staff
costs and related expenses. Capitalised development expenditure is stated at cost less accumulated amortisation (see
below) and any impairment losses.
(iii) Other intangible assets
Intangible assets other than goodwill that are acquired by the Group are stated at cost less accumulated amortisation
(see below) and any impairment losses.
Where computer software is cloud based and the Group does not have control of the software, the configuration and
customisation costs are expensed over either:
• The period the services are received, where costs are distinct from the underlying software
• The period of the SaaS arrangement, where costs are not distinct from the underlying software
Spirax Group Annual Report 2023
203
Financial Statements 1 Accounting policies continued
Intangible assets continued
(iv) Amortisation
Amortisation is charged to the Consolidated Income Statement on a straight-line basis over the estimated useful lives of
intangible assets, other than goodwill, from the date they are available for use. The annual principal amortisation rates are
as follows:
Capitalised development costs
ERP systems and software
Brand names and trademarks
20%
12–33%
5–33%
Manufacturing designs and core technology
6–50%
Non-compete undertakings and other
Customer relationships
20–100%
6–33%
Inventories
Inventories are measured at the lower of cost and net realisable value. Inventory cost is calculated on both first in, first out
and weighted average methodologies depending on which is deemed most appropriate. The cost of inventories includes
expenditure incurred in acquiring the inventories, production or conversion costs and other costs in bringing them to their
existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate
share of production overheads based on normal operating capacity.
Trade receivables and other receivables
Trade receivables are carried at original invoice amount (which is considered a reasonable proxy for fair value) and are
subsequently held at amortised cost less a loss allowance. Other receivables are initially measured at fair value. The loss
allowance of trade receivables is based on lifetime expected credit losses. Lifetime expected credit losses are calculated
by assessing historic credit loss experience, adjusted for factors specific to the receivable and operating company.
The movement in the provision is recognised in the Consolidated Income Statement.
Trade and other payables
Trade and other payables are recognised at fair value and subsequently held at amortised cost.
Provisions and contingent liabilities
A provision is recognised in the Consolidated Statement of Financial Position when the Group has a present legal or
constructive obligation as a result of a past event and it is probable that an outflow of resources, which can be reliably
measured, will be required to settle the obligation. If the obligation is expected to be settled within 12 months of the
reporting date, the provision is included within current liabilities and if expected to be settled after 12 months, it is included
in non-current liabilities.
In respect of product warranties, a provision is recognised when the underlying products or services are sold. Obligations
arising from restructuring plans are recognised when detailed formal plans have been established and there is a valid
expectation that such a plan will be carried out. Provisions are recognised at an amount equal to the best estimate of the
expenditure required to settle the Group’s liability. If the likelihood of having to settle the obligation is less than probable but
more than remote, or the amount of the obligation cannot be measured reliably, then a contingent liability is disclosed.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less, and
are held at amortised cost. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash
management are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows.
Going concern
The Group’s principal objective when managing liquidity is to safeguard the ability to continue as a going concern for at
least 12 months from the date of signing the 2023 Annual Report. The Group retains sufficient resources to remain in
compliance with all the required terms and conditions within its borrowing facilities with material headroom and no material
uncertainties have been identified. The Group continues to conduct ongoing risk assessments on its business operations
and liquidity. Consideration has also been given to reverse stress tests, which seek to identify factors that might cause the
Group to require additional liquidity and form a view as to the probability of these occurring.
The Group’s financial position remains robust, with the next maturity of our committed debt facilities being $150 million of
Bank Term loan which matures in October 2025 and which are accounted for within the cash flow forecast model. The
Group’s debt facilities contain a leverage covenant of up to 3.5x. Certain debt facilities also contain an interest cover
covenant of a minimum of 3.0x. The Group regularly monitors its financial position to ensure that it remains within the terms
of these debt covenants. At 31st December 2023 leverage (net debt excluding lease liabilities divided by adjusted earnings
before interest, tax, depreciation and amortisation) was 1.7x (2022: 1.7x), Interest cover (adjusted earnings before interest,
tax, depreciation and amortisation divided by net bank interest) was 10x (2022: 58x).
204
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 1 Accounting policies continued
Going concern continued
Reverse ‘stress testing’ was also performed to assess the level of business under performance would be required for a
breach of the financial covenants to occur, the results of which evidenced that no reasonably possible change in future
forecast cash flows would cause a breach of these covenants. In addition, the reverse stress test cash flow modelling does
not take into account any mitigating actions which the Group would implement in the event of a severe and extended
revenue and profitability decline. Such actions would serve to further increase covenant headroom.
Having assessed the relevant business risks as discussed in our principal risks on pages 101-105 and having considered the
potential impact of any climate change related risks as outlined within the Task Force on Climate-related Financial
Disclosures section on pages 84-91, and in the context of the liquidity and covenant headroom available under several
alternative scenarios as set out in the viability assessment on pages 42-43, the Directors consider it appropriate to continue
to adopt the going concern basis in preparing the financial statements.
Alternative performance measures
The Group reports under International Financial Reporting Standards (IFRS) and also uses alternative performance measures
where the Board believes that they help to effectively monitor the performance of the Group and users of the Financial
Statements might find them informative. Certain alternative performance measures also form a meaningful element of
Executive Directors’ variable remuneration. A definition of the alternative performance measures included in the Annual
Report and a reconciliation to the closest IFRS equivalent are disclosed in the Appendix. Adjusted performance measures
are not considered to be a substitute for, or superior to, IFRS measures.
Employee benefits
(i) Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the Consolidated
Income Statement as incurred.
(ii) Defined benefit plans
The costs of providing pensions under defined benefit schemes are calculated in accordance with the advice of
qualified actuaries and spread over the period during which benefit is expected to be derived from the employees’
services. The Group’s net obligation or surplus in respect of defined benefit pensions is calculated separately for each
plan by estimating the amount of future benefit that employees have earned in return for their service in the current and
prior periods. Past service costs are recognised straight away.
That benefit is discounted at rates reflecting the yields on AA credit rated corporate bonds that have maturity dates
approximating the terms of the Group’s obligations to determine its present value. Pension scheme assets are measured
at fair value at the Statement of Financial Position date. Actuarial gains and losses, differences between the expected
and actual returns, and the effect of changes in actuarial assumptions are recognised in the Statement of
Comprehensive Income in the year they arise. Any scheme surplus (to the extent it is considered recoverable under the
provisions of IFRIC 14) or deficit is recognised in full in the Statement of Financial Position.
The costs of other post-employment liabilities are calculated in a similar way to defined benefit pension schemes and
are spread over the relevant period, in accordance with the advice of qualified actuaries.
(iii) Employee share plans
Incentives in the form of shares are provided to employees under share award schemes. The fair value of these awards
at their date of grant is charged to the Consolidated Income Statement over the relevant vesting periods with a
corresponding increase in equity. The value of the charge is adjusted to reflect share awards vesting.
(iv) Long-term share incentive plans
The fair value of awards is measured at the date of grant and the cost spread over the vesting period. The amount
recognised as an expense is not adjusted to reflect market-based performance conditions, but is adjusted for non-
market-based performance conditions. Awards can vest in the form of shares, a nil-cost option or, exceptionally, cash.
Revenue
The Group applies the following five-step framework when recognising revenue:
Step 1: Identify the contracts with customers.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.
The criteria the Group uses to identify the performance obligations within a contract are:
• The customer must be able to benefit from the goods or services either on its own or in combination with other resources
available to the customer and
• The entity’s promise to transfer the good or service to the customer is separable from other promises in the contract
Spirax Group Annual Report 2023
205
Financial Statements 1 Accounting policies continued
Revenue continued
The transaction price is the value that the Group expects to be entitled to from the customer and includes discounts,
rebates, credits, price concessions, incentives, performance bonuses, penalties and liquidated damages, but is not reduced
for bad debts. It is net of any value-added tax (VAT) and other sales-related taxes. Variable consideration that is dependent
on certain events is estimated, and then constrained to the extent that it is highly probable.
Revenue is recognised over time as the product is being manufactured or a service is being provided if any of the following
criteria are met:
• The Group is creating a bespoke item which does not have an alternative use to the Group (i.e. we would incur a
significant loss to rework and/or sell to another customer) and the entity has a right to payment for work completed to
date including a reasonable profit
• The customer controls the asset that is being created or enhanced during the manufacturing process, i.e. the customer
has the right to significantly modify and dictate how the product is built during construction
• As customers receive services provided by the Group, they simultaneously consume the benefit of such services
Judgement is made when determining if a product is bespoke and the value of revenue to recognise over time as products
are being manufactured. However, due to the low value of orders for bespoke items in progress at the 31st December 2023
where we have a right to payment of costs plus a reasonable profit, this is not considered a critical judgement.
The value of revenue to be recognised over time for goods being manufactured is calculated using a cost-based input
approach. This is considered a faithful depiction of the transfer of the goods as the costs incurred, total costs expected to
be incurred and order value are known. Each month progress on manufacturing contracts is reviewed and a contract asset
or liability recognised for any work performed to date. Any amount previously recognised as a contract asset is reclassified
to trade receivables at the point at which it is invoiced to the customer. If an interim payment exceeds the revenue
recognised to date under the cost-based input method then the Group recognises a contract liability for the difference.
The value of revenue to be recognised over time for services being provided is calculated based on the stage of completion.
This is assessed by reference to the contractual performance obligations with each separate customer and the costs
incurred on the contract to date in comparison to the total forecast costs of the contract. Payment for such services is not
due from the customer until they are complete and therefore a contract asset is recognised over the period in which the
services are performed representing the entity’s right to consideration for the services performed to date.
If the criteria to recognise revenue over time are not met then revenue is recognised at a point in time when the customer
obtains control of the asset and the performance obligation is satisfied. The customer obtains control of the asset when the
customer can direct the use of the asset and obtain the benefits from the asset.
Factors the Group considers when determining the point in time when control of the asset has passed to the customer and
revenue recognised include:
• The Group has a right to payment
• Legal title is transferred to the customer
• Physical possession of the asset has been transferred to the customer
• The customer has the significant risks and rewards of ownership
• The customer has accepted the asset
Control normally passes and revenue is recognised when the goods are either dispatched or delivered to the customer
(in accordance with the terms and conditions of the sale) or the installation and testing are completed. Until this point, no
revenue is recognised on point in time sales. Due to this, a contract liability may be recognised at the time of the initial sales
transaction if a payment in advance, or deposit is received.
A large proportion of the Group’s revenue qualifies for recognition on dispatch or delivery of the goods to the customer as
this is when the performance obligation is satisfied. This is normally the trigger point for raising an invoice per the terms and
conditions of the order. Therefore invoicing for a large proportion of the Group’s revenue occurs at the same time as when
the performance obligation is satisfied. Contract assets at 31st December 2023 were £17.0m (1.0% of total revenue) (2022:
£11.7m (0.7% of total revenue)).
All revenue recognised by the Group is generated through contracts with customers.
When the unavoidable costs of fulfilling the contract exceed the revenue to be recognised the contract is loss making and
the expected loss is recognised in the Consolidated Consolidated Income Statement immediately.
Warranties that give assurance that a product meets agreed-upon specifications are accounted for as a cost provision and
do not impact the timing and value of revenue. The Group does not have any material warranties that promise more than just
providing assurance that a product meets agreed-upon specifications.
Costs of obtaining a contract, which are only incurred because the contract was obtained, are capitalised and expensed at
a later date. At 31st December 2023 no costs of obtaining a contract were capitalised. All other assets recognised to fulfil
a contract are within the scope of other accounting standards and policies.
206
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 1 Accounting policies continued
Leases
The Group assesses whether a contract is or contains a lease at inception of the contract. The Group recognises a right-of-
use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for
short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (assets with a
value of less than £5,000). For these leases, the Group recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in
which economic benefits from the leased assets are consumed.
For new leases entered into, the lease liability is initially measured at the present value of the lease payments that are not
paid at the commencement date, discounted by using the incremental borrowing rate for the related geographical location
unless the rate implicit in the lease is readily determinable. The incremental borrowing rate is calculated at the rate of
interest at which the company would have been able to borrow for a similar term and with a similar security the funds
necessary to obtain a similar asset in a similar market.
Lease payments included in the measurement of the lease liability comprise:
• Fixed lease payments (including in substance fixed payments), less any lease incentives receivable
• Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement
date
• The amount expected to be payable by the Company under residual value guarantees
• The exercise price of purchase options, if the Company is reasonably certain to exercise the options
• Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability and
by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
• The lease term has changed or there is a significant event or change in circumstances resulting in a change in the
assessment of exercise of a purchase option
• The lease payments change due to changes in an index or rate or a change in expected payment under a residual
guarantee value
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or
before the commencement date and any initial direct costs. They are subsequently measured at cost less accumulated
depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise
a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.
Variable lease payments that do not depend on an index or rate are not included in the measurement of the lease liability
and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition
that triggers those payments occurs.
Judgement is required when determining whether to include or exclude optional extension periods within the lease term,
and estimation is required when calculating the incremental borrowing rate used to discount the future lease cash flows.
These are not considered critical judgements or a key source of estimation uncertainty.
Taxation
The tax charge comprises current and deferred tax. Income tax expense is recognised in the Consolidated Income
Statement unless it relates to items recognised directly in equity or in other comprehensive income, when it is also
recognised in equity or other comprehensive income respectively. Current tax is the expected tax payable on the profit for
the year and any adjustments in respect of previous years using tax rates enacted or substantively enacted at the reporting
date. Tax positions are reviewed to assess whether a provision should be made on prevailing circumstances. Tax provisions
are included within current taxation payable. Deferred tax is provided on temporary differences arising between the tax
base of assets and liabilities, and their carrying amounts in the Financial Statements. Deferred tax assets are recognised to
the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax
is provided using rates of tax that have been enacted or substantively enacted at the date of the Statement of Financial
Position or the date that the temporary differences are expected to reverse. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Share capital and repurchased shares
When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly
attributable costs, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares or placed
in an Employee Benefit Trust and are presented as a deduction from total equity.
Spirax Group Annual Report 2023
207
Financial Statements 2 Segmental reporting
As required by IFRS 8 Operating Segments, the segmental structure reflects the current internal reporting provided to the
Chief Operating Decision Maker (considered to be the Board) on a regular basis to assist in making decisions on resource
allocation to each segment and to assess performance.
The Group is organised into 3 segments with the following core product expertise:
• Steam Thermal Solutions - Industrial and commercial steam systems
• Electric Thermal Solutions - Electrical process heating and temperature management solutions
• Watson-Marlow - Peristaltic and niche pumps and associated fluid path technologies
No changes to the structure of operating segments have been made during the current period.
Analysis by operating segment
2023
Steam Thermal Solutions
Electric Thermal Solutions
Watson-Marlow
Corporate
Total
Net financing expense
Share of (loss)/profit of Associate
Profit before tax
2022
Steam Thermal Solutions
Electric Thermal Solutions
Watson-Marlow
Corporate
Total
Net financing expense
Share of (loss)/profit of Associate
Profit before tax
The following table details the split of revenue by geography for the combined Group:
Europe, Middle East and Africa
Asia Pacific
Americas
Total revenue
Total
operating
profit
£m
205.2
25.8
81.2
Operating
margin
%
22.5%
6.8%
20.6%
Revenue
£m
910.1
378.5
394.0
—
(27.8)
1,682.6
284.4
16.9%
Revenue
£m
866.0
256.1
488.5
—
1,610.6
(39.9)
—
244.5
Total
operating
profit
£m
196.2
7.3
154.4
(39.1)
318.8
(10.7)
—
308.1
2023
£m
718.7
357.4
606.5
Operating
margin
%
22.7%
2.9%
31.6%
19.8%
2022
£m
649.6
384.3
576.7
1,682.6
1,610.6
Revenue generated by Group companies based in the USA is £454.2m (2022: £433.0m), in China is £177.8m (2022:
£213.2m), in Germany is £153.2m (2022: £134.3m), in the UK is £110.0m (2022: £115.7m) and in the rest of the world is
£787.4m (2022: £714.4m).
208
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 2 Segmental reporting continued
Net financing income and expense
Steam Thermal Solutions
Electric Thermal Solutions
Watson-Marlow
Corporate
Total net financing expense
Net assets
Steam Thermal Solutions
Electric Thermal Solutions
Watson-Marlow
Corporate*
Liabilities
Net deferred tax
Net tax payable
Net debt including lease liabilities
Net assets
2022
Income
£m
2022
Expense
£m
2023
Income
£m
2023
Expense
£m
4.1
0.8
0.9
5.5
11.3
(3.3)
(1.6)
(1.2)
(45.1)
(51.2)
2023
Net
£m
0.8
(0.8)
(0.3)
(39.6)
(39.9)
3.6
0.3
0.3
1.4
5.6
2022
Net
£m
1.8
(0.2)
(0.3)
(12.0)
(10.7)
2022
Liabilities
£m
(219.2)
(80.2)
(55.3)
(7.4)
(1.8)
(0.5)
(0.6)
(13.4)
(16.3)
2022
Assets
£m
756.8
1,171.9
423.8
15.5
2023
Assets
£m
714.1
1,128.8
429.3
31.9
2023
Liabilities
£m
(203.7)
(82.7)
(43.6)
(1.1)
2,304.1
(331.1)
2,368.0
(362.1)
(331.1)
(37.2)
(14.7)
(763.4)
1,157.7
(362.1)
(59.1)
(21.4)
(755.6)
1,169.8
* In order to align with how we manage net assets across the Group, we have reallocated specific assets and liabilities to the corporate operating
segment in both the current period and the comparative periods. In the prior year, for assets, £9.6m has been allocated out of Steam Thermal
Solutions with the remaining balance split between Electric Thermal Solutions and Watson-Marlow. For liabilities, £7.6m has been allocated out of
Steam Thermal Solutions with the remaining adjustment split between Electric Thermal Solutions and Watson-Marlow.
Non-current assets in the USA were £689.1m (2022: £686.8m), in France were £388.7m (2022: £403.1m), in the UK were
£251.1m (2022: £284.1m), in Germany were £161.0m (2022: £165.6m) and in the rest of the world were £193.7m (2022:
£191.8m).
Capital additions, depreciation, amortisation and impairment
Steam Thermal Solutions
Electric Thermal Solutions
Watson-Marlow
Corporate*
Group total
2023
Capital
additions
£m
2023
Depreciation,
amortisation
and impairment
£m
48.2
32.2
66.6
14.1
161.1
47.9
40.3
24.5
—
112.7
2022
Capital
additions
£m
43.8
285.4
76.4
3.3
408.9
2022
Depreciation,
amortisation
and impairment
£m
32.9
24.7
19.0
4.4
81.0
* In order to align with how we manage net assets across the Group, we have reallocated specific capital additions, depreciation, amortisation and
impairment to the corporate operating segment in both the current period and the comparative periods. In the prior year, both capital additions
and depreciation, amortisation and impairment have been allocated out of Steam Thermal Solutions.
Capital additions include property, plant and equipment of £84.0m (2022: £135.0m) and intangible assets of £25.0m (2022:
£258.3m). Right-of-use asset additions of £52.1m (2022: £15.6m) occurred during the 12-month period to 31st December
2023. Capital additions split between the USA, UK and rest of the world are USA £68.7m (2022: £186.4m), UK £43.6m
(2022: £51.8m) and rest of the world £48.8m (2022: £170.7m).
Spirax Group Annual Report 2023
209
Financial Statements 3 Operating costs
Cost of inventories recognised as an expense
Staff costs (Note 4)
Depreciation, amortisation and impairment
Other operating charges
Total operating costs
2023
£m
402.5
630.4
112.7
252.6
2022
£m
385.1
570.3
81.0
255.4
1,398.2
1,291.8
Total staff costs includes a credit of £3.8m (2022: £2.0m) relating to amounts capitalised during the year. Excluding this
credit, total staff costs were £634.2m (2022: £572.3m).
4 Staff costs and numbers
The aggregate payroll costs of persons employed by the Group were as follows:
Wages and salaries
Social security costs
Pension costs
Total payroll costs
2023
£m
523.1
82.0
29.1
2022
£m
463.2
79.9
29.2
634.2
572.3
The average number of persons employed by the Group (including Directors) during the year was as follows:
2023
2,608
7,514
10,122
2022
2,699
6,670
9,369
2023
£m
(46.9)
(2.2)
(2.1)
(51.2)
11.3
(39.9)
(35.6)
(2.2)
(2.1)
2022
£m
(14.0)
(1.5)
(0.8)
(16.3)
5.6
(10.7)
(8.4)
(1.5)
(0.8)
(39.9)
(10.7)
United Kingdom
Rest of the world
Group average
5 Net financing income and expense
Financial expenses
Bank and other borrowing interest payable
Interest expense on lease liabilities
Net interest on pension scheme liabilities
Financial income
Bank interest receivable
Net financing expense
Net bank interest
Interest expense on lease liabilities
Net interest on pension scheme liabilities
Net financing expense
210
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 6 Profit before taxation
Profit before taxation is shown after charging:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of acquired intangibles
Amortisation of other intangibles
Non-current asset impairment
Leases exempt from IFRS 16 (short-term, low value or variable lease payments)
Exchange difference gains
(Loss)/profit on disposal of non-current assets
Research and development
Auditor’s remuneration
Audit of these Financial Statements
Amounts receivable by the Company’s Auditor and its Associates in respect of:
Audit of Financial Statements of subsidiaries of the Company
Total audit fees
Audit-related assurance services
Total non-audit fees
Total Auditor’s remuneration
2023
£m
(35.5)
(16.2)
(37.2)
(8.1)
(15.7)
(3.1)
1.8
(0.1)
2022
£m
(33.2)
(13.5)
(23.7)
(8.1)
(2.5)
(2.5)
5.1
1.4
(16.8)
(15.8)
2023
£m
0.7
1.9
2.6
0.2
0.2
2.8
2022
£m
0.4
1.9
2.3
0.1
0.1
2.4
7 Directors’ emoluments
Directors represent the key management personnel of the Group under the terms of IAS 24 Related Party Disclosures. Total
remuneration is shown below.
Further details of salaries and short-term benefits, post-retirement benefits, share plans and long-term share incentive
plans are shown in the Annual Report on Remuneration 2023 on pages 162 to 174. The share-based payments charge
comprises a charge in relation to the Performance Share Plan and the Employee Share Ownership Plan (as described in
Note 22).
Salaries and short-term benefits
Post-retirement benefits
Share-based payments
Total Directors’ remuneration
2023
£m
2.4
0.1
0.3
2.8
2022
£m
2.9
0.2
2.0
5.1
Spirax Group Annual Report 2023
211
Financial Statements 8 Taxation
Analysis of charge in the year
UK corporation tax:
Current tax on income for the year
Adjustments in respect of prior years
Foreign tax:
Current tax on income for the year
Adjustments in respect of prior years
Total current tax charge/(credit)
UK deferred tax:
Origination and reversal of timing differences
Adjustment in respect of prior years
Foreign deferred tax:
Origination and reversal of timing differences
Adjustment in respect of prior years
Total deferred tax (credit)/charge
Tax on profit on ordinary activities
Reconciliation of effective tax rate
Profit before tax and share of profit/(loss) of Associate
Expected tax at blended rate of 26.6% (2022 : 25.5%)
Increased withholding tax on overseas dividends
Non-deductible expenditure
Overprovided in prior years
Other reconciling items
Total tax in Consolidated Income Statement
Effective tax rate
2023
£m
2022
£m
9.4
(0.1)
9.3
75.3
(0.7)
74.6
83.9
(11.4)
0.7
(10.7)
(8.6)
(4.1)
(12.7)
(23.4)
60.5
2023
£m
244.5
65.0
7.6
0.8
(4.2)
(8.7)
60.5
24.7%
7.1
(0.7)
6.4
88.6
(1.3)
87.3
93.7
(0.4)
(0.7)
(1.1)
(11.9)
2.4
(9.5)
(10.6)
83.1
2022
£m
308.1
78.7
6.2
3.6
(0.3)
(5.1)
83.1
27.0%
The Group’s tax charge in future years will be affected by the proportion of profits arising and the effective tax rates in the
various countries in which the Group operates. The rate may also be affected by the impact of any acquisitions.
The Group is subject to a tax adjustment in Argentina that seeks to offset the impact of inflation upon taxable profits. Given
the current high levels of inflation in Argentina, this has a meaningful impact on the group’s tax charge. The adjustment gave
a reduction in the Group’s effective tax rate in the year of 260 bps being £6.4m on a statutory basis (2022 : 180 bps being
£5.5m), included within ‘Other reconciling items’ in the reconciliation above. Whilst we include the expected impact of this
adjustment in our guidance for the effective tax rate, this is difficult to accurately forecast given the current volatility of
Argentinian inflation.
The Group monitors income tax developments in the territories in which it operates.
On 14th July 2023, the government of the United Kingdom, where the parent company is incorporated, enacted the Pillar
Two income taxes legislation effective from 1st January 2024. Under the legislation, the parent company will be required to
pay top-up tax on profits of its subsidiaries that are taxed at an effective tax rate of less than 15 per cent. The main
jurisdiction where this initiative may impact is Argentina. As noted above, given the volatility of Argentinian inflation it is
difficult to accurately forecast the impact that this Base Erosion and Profit Shifting (BEPS) initiative will have on the Group’s
tax charge. The Group is continuing to assess the impact of the Pillar Two income taxes legislation on its future financial
performance.
212
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 8 Taxation continued
The Group has applied the temporary exception issued by the IASB in May 2023 from the accounting requirements for
deferred taxes in IAS 12. Accordingly, the Group neither recognises nor discloses information about deferred tax assets and
liabilities related to Pillar Two income taxes.
In October 2017, the European Commission (EC) opened a State Aid investigation into the UK’s Controlled Foreign Company
(CFC) regime. In April 2019, the EC published its final decision that the UK CFC Finance Company Exemption (FCE)
constituted State Aid in certain circumstances, following which the UK Government appealed the decision to the EU General
Court. In June 2022, the EU General Court dismissed the UK Government’s appeal following which the UK Government
lodged a further appeal to the European Court of Justice. The UK Government’s appeal has been heard but no decision has
been released. Like other UK Groups, the Group submitted its own appeal against the EC’s decision.
The Group’s benefit from the FCE in the period from 1st January 2013 to 31st December 2023 is approximately £8.9m,
including compound interest. To date, the Group has received, paid, and appealed Charging Notices totalling £4.9m,
assessed for the period from 1st January 2017 to 31st December 2018. The Group expects to recover this in the event of a
successful appeal and has recognised a receivable for the full amount at the year end balance sheet date as a non-current
asset. The Group has not recognised a receivable for any repayment interest, estimated at £0.2m, on the amount of £4.9m.
The Group has not received a Charging Notice for the period prior to 1st January 2017, the benefit for this period being
£2.9m. HMRC has enquired into the benefit received during 2019, which the Group estimates to be £1.1m. No provisions
have been recognised at the year end balance sheet date for either the Charging Notice amounts or for the estimates for
the other periods.
No tax (after double tax relief for underlying tax) is expected to be payable on the future remittance of retained earnings of
overseas subsidiaries.
The expected tax at blended rate is the product of accounting profit arising in each country multiplied by the statutory tax
rates in each country.
The effective tax rate is calculated as a percentage of profit before tax and share of profit/(loss) of Associates.
9 Earnings per share
Profit attributable to equity shareholders (£m)
Weighted average shares (million)
Dilution (million)
Diluted weighted average shares (million)
Basic earnings per share
Diluted earnings per share
Basic and diluted earnings per share calculated on an adjusted profit basis are included in the Appendix.
The dilution is in respect of the Performance Share Plan.
10 Dividends
Amounts paid in the year:
Final dividend for the year ended 31st December 2022 of 109.5p (2021: 97.5p) per share
Interim dividend for the year ended 31st December 2023 of 46.0p (2022: 42.5p) per share
Total dividends paid
Amounts arising in respect of the year:
Interim dividend for the year ended 31st December 2023 of 46.0p (2022: 42.5p) per share
Proposed final dividend for the year ended 31st December 2023 of 114.0p (2022: 109.5p) per share
Total dividends arising
2023
183.6
73.6
0.2
73.8
2022
224.7
73.6
0.2
73.8
249.5p
305.1p
248.9p
304.4p
2023
£m
80.7
33.8
114.5
33.8
84.0
117.8
2022
£m
71.9
31.2
103.1
31.2
80.8
112.0
The proposed dividend is subject to approval in 2024. It is therefore not included as a liability in these Financial Statements.
No scrip alternative to the cash dividend is being offered in respect of the proposed final dividend for the year ended
31st December 2023.
Spirax Group Annual Report 2023
213
Financial Statements 11 Investment in Associate
On 4th July, the Group invested in Kyoto Group AS (Kyoto) for total consideration of 41.1m NOK (£3.0m). Kyoto has
specialised skills within thermal energy storage solutions and provides a thermal energy storage solution named the Kyoto
Heatcube, which enables storage of heat from different power and heat sources for later use and thereby contributing to
low cost and low CO2 emissions. As a result of the rights and powers attached to the Group’s shareholding, the Group has
concluded that it has significant influence and, as a result, will equity account for its share of Kyoto’s results, as an
investment in Associate. This investment in Associate is not considered individually material to the Group. As Kyoto is listed
on the Oslo Stock Exchange, the Group will report the share of profit/(loss) for the year on a 6 month time lag, this does not
have a material impact on the Group’s results.
Summarised financial information in respect of the Group’s individually immaterial Associate is set out below.
Cost of investment
Share of equity
Total investment in Associate
Profit for the year
Associate
2023
£m
Associate
2022
£m
3.0
—
3.0
—
1.4
(1.4)
—
0.1
Details of the Group’s Associate at 31st December 2023 are as follows:
Name of Associate
Kyoto Group AS
Country of incorporation
and operation
Proportion of ownership interest and
voting power held
Principal activity
Norway
15.0%
Manufacturing and selling
Details of the Group’s Associate at 31st December 2022 are as follows:
Name of Associate
Country of incorporation
and operation
Proportion of ownership interest and
voting power held
Principal activity
Econotherm (UK) Ltd
UK
14.7%
Manufacturing and selling
On 4th July, the Group disposed of our investments in Econotherm (UK) Ltd (Econotherm) for £0.4m. At the date of the sale,
the investment value of Econotherm was £nil with cumulative unrecognised losses of £0.3m. As such, a profit on disposal of
£0.4m is recognised within Group operating profit.
214
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements
12 Property, plant and equipment
2023
Cost:
At 1st January 2023
Exchange adjustments
Additions
Transfers
Disposals
At 31st December 2023
Depreciation:
At 1st January 2023
Exchange adjustments
Charged in year
Impairment
Transfers
Disposals
At 31st December 2023
Net book value:
At 31st December 2023
2022
Cost:
At 1st January 2022
Exchange adjustments
Acquisitions
Additions
Transfers
Disposal of subsidiaries
Disposals
At 31st December 2022
Depreciation:
At 1st January 2022
Exchange adjustments
Charged in year
Impairment
Transfers
Disposals of subsidiaries
Disposals
At 31st December 2022
Net book value:
At 31st December 2022
Freehold
land and
buildings
£m
Leasehold
land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings,
tools and
equipment
£m
Assets under
construction
£m
165.1
(4.4)
160.7
3.4
35.9
(2.4)
197.6
38.5
(1.1)
37.4
4.8
—
—
(2.4)
39.8
53.6
(3.3)
50.3
1.3
—
(1.4)
50.2
12.9
(0.8)
12.1
2.1
—
—
(1.4)
12.8
244.4
(6.6)
237.8
27.9
3.1
(14.9)
253.9
139.2
(3.7)
135.5
17.2
1.8
(0.2)
(13.6)
140.7
121.5
(4.5)
117.0
10.6
5.5
(7.8)
125.3
67.7
(2.2)
65.5
11.4
—
0.3
(7.8)
69.4
58.2
(2.0)
56.2
40.8
(45.8)
(0.4)
50.8
—
—
—
—
—
—
—
—
Total
£m
642.8
(20.8)
622.0
84.0
(1.3)
(26.9)
677.8
258.3
(7.8)
250.5
35.5
1.8
0.1
(25.2)
262.7
157.8
37.4
113.2
55.9
50.8
415.1
Freehold
land and
buildings
£m
Leasehold
land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings,
tools and
equipment
£m
Assets under
construction
£m
157.7
6.1
163.8
7.3
2.8
—
—
(8.8)
165.1
36.9
1.8
38.7
6.4
2.1
—
—
(8.7)
38.5
40.8
1.7
42.5
9.4
1.4
0.7
(0.3)
(0.1)
53.6
10.9
0.5
11.4
1.8
—
—
(0.3)
—
12.9
204.2
9.0
213.2
11.2
23.1
7.9
(0.6)
(10.4)
89.4
3.1
92.5
2.1
17.1
17.5
(0.3)
(7.4)
244.4
121.5
127.4
5.9
133.3
15.5
0.4
—
(0.4)
(9.6)
139.2
61.8
2.7
64.5
9.5
—
—
(0.2)
(6.1)
67.7
22.3
1.8
24.1
0.7
59.9
(26.4)
—
(0.1)
58.2
—
—
—
—
—
—
—
—
—
Total
£m
514.4
21.7
536.1
30.7
104.3
(0.3)
(1.2)
(26.8)
642.8
237.0
10.9
247.9
33.2
2.5
—
(0.9)
(24.4)
258.3
126.6
40.7
105.2
53.8
58.2
384.5
Spirax Group Annual Report 2023
215
Financial Statements 12 Property, plant and equipment continued
All impaired assets have been impaired down to a recoverable amount of £nil. In 2023, the Group identified indicators of
impairment as a result of the restructure of the Watson- Marlow Business. A total of £1.8m was recognised within Group
operating profit. In the prior year, £2.5m was recognised in relation to the Chromalox manufacturing operations in Soissons
(France).
The total amount of transfers relates to property, plant and equipment transferred to other intangible assets (see Note 14).
13 Leases
Right-of-use assets
2023
Cost:
At 1st January 2023
Exchange adjustments
Additions
Disposals
At 31st December 2023
Depreciation:
At 1st January 2023
Exchange adjustments
Charged in the year
Disposals
At 31st December 2023
Net book value:
At 31st December 2023
Leased land
and buildings
£m
Leased plant
and machinery
£m
Leased fixtures,
fittings, tools
and equipment
£m
Total right-of-
use assets
£m
86.2
(3.1)
83.1
44.4
(7.4)
120.1
28.2
(0.9)
27.3
11.5
(5.9)
32.9
21.6
(0.6)
21.0
7.4
(4.0)
24.4
13.3
(0.4)
12.9
4.5
(3.3)
14.1
3.1
(0.2)
2.9
0.3
(0.6)
2.6
2.2
(0.1)
2.1
0.2
(0.6)
1.7
110.9
(3.9)
107.0
52.1
(12.0)
147.1
43.7
(1.4)
42.3
16.2
(9.8)
48.7
87.2
10.3
0.9
98.4
The vast majority of the right-of-use asset value relates to leased property where the Group leases a number of office and
warehouse sites in a number of geographical locations. The remaining leases are largely made up of leased motor vehicles,
where the Group makes use of leasing cars for sales and service engineers at a number of operating company locations.
The average lease term is 4.3 years (2022: 4.4 years).
216
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 13 Leases continued
Right-of-use assets continued
2022
Cost:
At 1st January 2022
Exchange adjustments
Acquisitions
Additions
Disposals
At 31st December 2022
Depreciation:
At 1st January 2022
Exchange adjustments
Charged in the year
Disposals
At 31st December 2022
Net book value:
At 31st December 2022
Leased land
and buildings
£m
Leased plant
and machinery
£m
Leased fixtures,
fittings, tools
and equipment
£m
Total right-of-
use assets
£m
73.9
3.9
77.8
3.8
6.5
(1.9)
86.2
19.0
1.6
20.6
9.1
(1.5)
28.2
17.2
1.0
18.2
0.1
4.7
(1.4)
21.6
9.8
0.6
10.4
4.1
(1.2)
13.3
58.0
8.3
2.4
0.2
2.6
0.2
0.3
—
3.1
1.8
0.1
1.9
0.3
—
2.2
0.9
93.5
5.1
98.6
4.1
11.5
(3.3)
110.9
30.6
2.3
32.9
13.5
(2.7)
43.7
67.2
31st
December
2023
£m
31st
December
2022
£m
16.2
2.2
1.9
0.9
0.3
(0.1)
21.4
13.5
1.5
1.9
0.4
0.2
(0.2)
17.3
The maturity analysis of lease liabilities is presented in Note 27.
Amounts recognised in Consolidated Income Statement
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases
Expense relating to leases of low value assets
Expense relating to variable lease payments not included in the measurement of the lease liability
Income from sublease right-of-use assets
Total impact on profit before tax
The total cash outflow for leases during 2023 was £21.4m (2022: £16.9m).
The following cash outflows (undiscounted) are those that the Group is potentially exposed to in future periods but are
currently not reflected in the measurement of lease liabilities:
• £0.1m relating to variable lease payments not based on an index or rate (2022: £0.1m)
• £10.6m relating to optional extension periods that are not reasonably certain to be exercised as at 31st December 2023
(2022: £1.1m)
• £3.0m relating to leases that the Group is committed to, but have not commenced as at 31st December 2023 (2022: £28.1m)
Spirax Group Annual Report 2023
217
Financial Statements 14 Goodwill and other intangible assets
2023
Cost:
At 1st January 2023
Exchange and other adjustments
Additions
Transfers from property, plant and equipment
Disposals
At 31st December 2023
Amortisation:
At 1st January 2023
Exchange adjustments
Charged in the year
Impairment
Transfers from property, plant and equipment
Disposals
At 31st December 2023
Net book value:
At 31st December 2023
Acquired
intangibles
£m
Development
costs
£m
Computer
software
£m
Total other
intangibles
£m
Goodwill
£m
632.6
(19.8)
612.8
3.6
—
—
616.4
176.8
(4.1)
172.7
37.2
—
—
—
209.9
34.9
(0.2)
34.7
7.2
1.7
(7.1)
36.5
22.0
(0.1)
21.9
3.0
—
—
(5.6)
19.3
88.6
(2.9)
85.7
14.2
(0.4)
(1.7)
97.8
57.0
(1.5)
55.5
5.1
13.9
(0.1)
(1.7)
72.7
756.1
(22.9)
733.2
25.0
1.3
(8.8)
710.8
(22.6)
688.2
—
—
—
750.7
688.2
255.8
(5.7)
250.1
45.3
13.9
(0.1)
(7.3)
301.9
7.5
0.2
7.7
—
—
—
—
7.7
406.5
17.2
25.1
448.8
680.5
Since 2018, Steam Thermal Solutions has been engaged in a project to upgrade its ERP systems. Over time the scope of the
project has expanded substantially to include a wider range of business applications and the external technology market
has developed. Additionally, the Group has taken the decision to implement consistent ERP solutions across all three
Businesses this has resulted in a £13.9m impairment recognised in computer software.
2022
Cost:
At 1st January 2022
Exchange and other adjustments
Acquisitions
Additions
Transfers from property, plant and equipment
Disposal of subsidiary
Disposals
At 31st December 2022
Amortisation:
At 1st January 2022
Exchange adjustments
Charged in the year
Disposal of subsidiary
Disposals
At 31st December 2022
Net book value:
At 31st December 2022
218
Spirax Group Annual Report 2023
Acquired
intangibles
£m
Development
costs
£m
Computer
software
£m
Total other
intangibles
£m
Goodwill
£m
359.2
28.8
388.0
244.6
—
—
—
—
30.2
0.3
30.5
0.1
4.3
—
—
—
632.6
34.9
142.4
10.7
153.1
23.7
—
—
176.8
19.5
0.2
19.7
2.3
—
—
22.0
78.0
1.7
79.7
0.4
8.9
0.3
(0.3)
(0.4)
88.6
49.8
2.0
51.8
5.8
(0.3)
(0.3)
57.0
467.4
30.8
498.2
245.1
13.2
0.3
(0.3)
(0.4)
418.4
33.1
451.5
259.3
—
—
—
—
756.1
710.8
211.7
12.9
224.6
31.8
(0.3)
(0.3)
255.8
7.2
0.3
7.5
—
—
—
7.5
455.8
12.9
31.6
500.3
703.3
Notes to the Consolidated Financial Statements continuedFinancial Statements 14 Goodwill and other intangible assets continued
Acquired intangibles
The disclosure by class of acquired intangible assets is shown in the tables below.
2023
Cost:
At 1st January 2023
Exchange and other adjustments
Additions
At 31st December 2023
Amortisation and impairment:
At 1st January 2023
Exchange adjustments
Amortisation and impairment
At 31st December 2023
Net book value:
At 31st December 2023
Customer
relationships
£m
Brand names
and
trademarks
£m
Manufacturing
designs and
core
technology
£m
Non-compete
undertakings
and other
£m
Total
acquired
intangibles
£m
181.9
(5.9)
176.0
3.6
179.6
51.9
(1.0)
50.9
11.9
62.8
338.1
(11.4)
326.7
—
326.7
67.0
(2.4)
64.6
17.1
81.7
84.2
(2.3)
81.9
—
81.9
34.8
(0.5)
34.3
4.6
38.9
28.4
(0.2)
28.2
—
28.2
23.1
(0.2)
22.9
3.6
26.5
632.6
(19.8)
612.8
3.6
616.4
176.8
(4.1)
172.7
37.2
209.9
116.8
245.0
43.0
1.7
406.5
Customer relationships are amortised over their useful economic lives in line with the accounting policies disclosed in Note
1. Within this balance the individually material balances relate to Durex Industries £73.6m (2022: £83.3m) and Thermocoax
£24.0m (2022: £26.9m). The remaining amortisation periods are 13.9 years and 10.4 years respectively. Brand names and
trademark assets are amortised over their useful economic lives in line with the accounting policies disclosed in Note 1.
Within this balance individually material balances relate to Vulcanic £99.4m (2022: £106.1m), Durex Industries £19.1m (2022:
£21.2m), Chromalox £91.6m (2022: £103.5m) and Gestra £19.6m (2022: £22.4m). The remaining amortisation periods are
18.8 years, 18.9 years, 13.5 years and 8.3 years respectively.
Manufacturing designs and core technology are amortised over their useful economic lives in line with the accounting
policies disclosed in Note 1. There are no individually material items within this balance. Non-compete undertakings are
amortised over their useful economic lives in line with the accounting policies disclosed in Note 1.
2022
Cost:
At 1st January 2022
Exchange and other adjustments
Acquisitions
At 31st December 2022
Amortisation and impairment:
At 1st January 2022
Exchange adjustments
Amortisation and impairment
At 31st December 2022
Net book value:
At 31st December 2022
Customer
relationships
£m
Brand names
and
trademarks
£m
Manufacturing
designs
and core
technology
£m
Non-compete
undertakings
and other
£m
Total
acquired
intangibles
£m
87.1
5.0
92.1
89.8
181.9
42.2
2.9
45.1
6.8
51.9
190.2
19.0
209.2
128.9
338.1
49.9
5.0
54.9
12.1
67.0
60.2
3.9
64.1
20.1
84.2
28.6
1.8
30.4
4.4
34.8
21.7
0.9
22.6
5.8
28.4
21.7
1.0
22.7
0.4
23.1
359.2
28.8
388.0
244.6
632.6
142.4
10.7
153.1
23.7
176.8
130.0
271.1
49.4
5.3
455.8
Spirax Group Annual Report 2023
219
Financial Statements 14 Goodwill and other intangible assets continued
Impairment
In accordance with the requirements of IAS 36 Impairment of Assets, goodwill is allocated to the Group’s cash-generating
units, or groups of cash-generating units, that are expected to benefit from the synergies of the business combination that
gave rise to the goodwill.
Goodwill impairment is considered based on groups of CGUs that represent the lowest level to which goodwill is monitored
for internal management purposes, being each operating segment as disclosed in Note 2. The breakdown of the goodwill
value at 31st December across these is shown below:
Steam Thermal Solutions
Electric Thermal Solutions
Watson-Marlow
Total goodwill
2023
Goodwill
£m
2022
Goodwill
£m
125.8
494.7
60.0
680.5
127.4
514.9
61.0
703.3
The goodwill balance has been tested for annual impairment on the following basis:
The carrying values of goodwill have been assessed by reference to value in use. These have been estimated using cash
flows based on forecast information for the next financial year which have been approved by the Board and then extended
by a further four years based on the most recent forecasts prepared by management. In 2023 the forecast period
assumption has been reduced to five years across all segments to ensure consistency across the Group and to reflect
increased volatility in the macroenvironment in recent years leading to forecasting uncertainty.
The key assumptions on which the impairment tests are based are the discount rates and forecast cash flows which are
driven by growth rates and EBIT margins:
• Pre-tax discount rates are based on estimations of the assumptions that market participants operating in similar sectors
to the Group would make, using the Group’s economic profile as a starting point and adjusting appropriately, taking into
account the size of the business along with specific geographical and industry risk factors. Discount rates are not
adjusted for estimated impacts of inflation, which is consistent with the calculation of the future operating cash flows
to which they are applied
• Short to medium-term growth rates are based on external market growth rates (where available) and historical experience
within each group of CGUs. The short to medium term is defined as not more than five years
• Long-term growth rates are set using the weighted average GDP growth rates (IMF and Oxford Economics) of the group
of CGUs’ end markets
• EBIT margins are based on historical performance, operational gearing from higher sales and expected improvements
from operational efficiency initiatives.
The principal value in use assumptions were as follows:
Operating segment
2023
Discount rate
2023
Short to
medium-term
growth rate
2023
Long-term
growth rate
Period of
annual
cashflow
forecast
(years)
2022
Discount rate
2022
Short to
medium-term
growth rate
Steam Thermal Solutions
13.7% 5.0% – 6.3%
Electric Thermal Solutions
11.3% 6.3% – 17.1%
Watson-Marlow
12.6% 11.0% – 11.4%
3.8%
3.2%
3.5%
5
5
5
14.1% 5.5%–10.5%
11.3%
5.9%–10.1%
12.0% (1.0)%–12.4%
2022
Long-term
growth rate
3.1%
2.4%
2.7%
Period of
annual
cashflow
forecast
(years)
5
8
5
The results of the Group’s impairment tests are dependent upon estimates, particularly in relation to the key assumptions
described above. Sensitivity analysis of potential changes in the key assumptions has been undertaken based on the
following reasonably possible change sensitivities in isolation for Steam Thermal Solutions and Watson-Marlow:
• A 50 bps increase in the discount rate applied to each group of CGUs
• A 100 bps reduction in the short to medium-term growth rates in Steam Thermal Solutions driven by further possible
downward revisions to IP growth forecasts
• A range of 0 to 1,000 bps reduction in short to medium term growth rates to reflect the possible delay in Biopharm
recovery within Watson-Marlow
• A 100 bps reduction in the EBIT margin used in the cash flow projections
220
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 14 Goodwill and other intangible assets continued
Impairment continued
For Electric Thermal Solutions, the following combination of sensitivities was applied:
• A 50 bps increase in the discount rate, in addition to 15 bps increase to long-term growth rate
• A range of 0 bps – 660 bps reduction in the short to medium-term growth rates driven by delayed completion of
operational improvement initiatives alongside slower recovery of demand within the semiconductor sector
• A range of 0 bps to 130 bps reduction in the EBIT margin used in the cash flow projections, resulting from the short to
medium-term growth rate sensitivities
For each group of CGUs, the Directors do not consider that there are any reasonably possible change sensitivities for the
business that could arise in the next 12 months that would result in an impairment charge being recognised.
15 Deferred tax assets and liabilities
Movement in deferred tax during the year 2023
Accelerated capital allowances
Provisions
Losses
Inventory
Pensions
Acquired intangibles
Leases - right of use assets*
Leases - liabilities*
Other temporary differences
Group total
Movement in deferred tax during the year 2022
1st January
2023
£m
Recognised
in income
£m
Recognised
in OCI
£m
Recognised
in equity
£m
Acquisitions
£m
31st December
2023
£m
(22.8)
11.8
16.2
7.3
13.2
(91.0)
(14.4)
15.1
5.5
1.4
(0.7)
11.3
(0.9)
(0.7)
9.2
(7.3)
7.1
4.0
(59.1)
23.4
—
—
—
—
1.1
—
—
—
(2.1)
(1.0)
0.4
(0.7)
—
(0.1)
(0.3)
2.3
0.6
(0.6)
(1.3)
0.3
—
—
—
—
—
(0.8)
—
—
—
(0.8)
(21.0)
10.4
27.5
6.3
13.3
(80.3)
(21.1)
21.6
6.1
(37.2)
1st January
2022
£m
Recognised
in income
£m
Recognised
in OCI
£m
Recognised
in equity
£m
Acquisitions
£m
31st December
2022
£m
Accelerated capital allowances
(12.3)
(9.9)
Provisions
Losses
Inventory
Pensions
Acquired intangibles
Leases - right of use assets*
Leases - liabilities*
Other temporary differences
Group total
8.1
5.6
5.0
12.0
(55.0)
(13.5)
14.1
0.3
(35.7)
3.4
9.5
2.3
(1.5)
4.1
0.8
(0.7)
2.6
10.6
—
(0.4)
—
—
1.7
(2.3)
—
—
2.8
1.8
(0.4)
(0.2)
(22.8)
0.5
0.1
—
0.7
(5.6)
(0.6)
0.6
(0.4)
(5.1)
0.2
1.0
—
0.3
(32.2)
(1.1)
1.1
0.2
(30.7)
11.8
16.2
7.3
13.2
(91.0)
(14.4)
15.1
5.5
(59.1)
* The Group applied “Deferred Tax related to Assets and Liabilities arising from a Single Transaction” (Amendments to IAS 12) from 1 January 2023.
Following the amendments, the Group has recognised a separate deferred tax asset in relation to its lease liabilities and a deferred tax liability in
relation to its right-of-use assets.
Deferred tax assets and liabilities arising in the same tax jurisdiction have been offset where the taxable entity has a legally
enforceable right to set off current tax assets and liabilities, and the deferred tax assets and liabilities relate to taxes levied
by the same taxation authority. Below is the analysis of the deferred tax balances after the offset for 2023. No restatement
has been performed for the prior year but this would have reduced both balance by £52.7m:
Deferred tax asset
Deferred tax liability
Net deferred tax liability
2023
£m
31.0
(68.2)
(37.2)
2022
£m
69.0
(128.1)
(59.1)
Spirax Group Annual Report 2023
221
Financial Statements 15 Deferred tax assets and liabilities continued
At the Balance Sheet date, the Group has deductible temporary differences, unused tax losses and unused tax credits with
a tax value of £113.5m (2022: £98.4m) available for offset against future profits. A deferred tax asset has been recognised in
respect of £99.7m (2022: £84.6m). No deferred tax asset has been recognised in respect of the remaining £13.8m (2022:
£13.8m) as it is not considered probable that there will be future taxable profits available against which the relevant
deduction can be offset.
Excluding the losses in Argentina and India, which expire if unused within five years and eight years respectively, the losses
may be carried forward indefinitely. The associated unrecognised deferred tax asset in Argentina and India is £8.3m (2022:
£3.6m).
A deferred tax credit of £1.1m (2022: £1.8m credit) recognised in the Consolidated Statement of Comprehensive Income
(page 197) associated with the measurement of defined benefit obligations.
UK tax is not expected to arise upon the remittance of earnings of overseas subsidiaries. However, a tax liability may arise
due to dividend withholding taxes levied by overseas tax authorities. This tax liability is not expected to exceed £8.1m
(2022: £6.7m). As the Group controls the timing of these dividends and it is not expected the tax will arise in the foreseeable
future, no associated deferred tax liability has been recognised.
16 Inventories
Raw materials, consumables and components
Work in progress
Finished goods and goods for resale
Total inventories
2023
£m
130.4
40.2
114.6
285.2
2022
£m
136.1
39.5
114.4
290.0
The write-down of inventories recognised as an expense during the year was £15.2m (2022: £9.0m). This comprises a cost
of £15.6m (2022: £10.5m) to write down inventory to net realisable value reduced by £0.4m (2022: £1.5m) for reversal of
previous write-down reassessed as a result of customer demand.
The value of inventories expected to be recovered after more than 12 months is £15.1m (2022: £12.6m).
There is no material difference between the Statement of Financial Position value of inventories and their replacement cost.
None of the inventory has been pledged as security.
17 Other current assets
Contract assets
Prepayments
Other receivables
Total other current assets
2023
£m
17.0
24.9
29.5
71.4
2022
£m
11.7
25.5
42.4
79.6
Contract assets relate to revenue recognised that has not yet been invoiced to the customer.
Other receivables comprise various assets across the Group including £13.4m of other tax related receivables, £3.7m of
advanced payments to suppliers, £2.9m of other deposits made, £1.8m of derivative assets and £7.7m of other receivables.
18 Trade and other payables
Trade payables
Contract liabilities
Social security
Accruals
Other payables
Total trade and other payables
2023
£m
79.2
32.9
9.5
95.2
34.4
251.2
2022
£m
89.9
20.6
9.4
113.2
49.9
283.0
Contract liabilities relate to advance payments received from customers that have not yet been recognised as revenue.
£6.8m of the contract liabilities at 31st December 2022 was recognised as revenue during 2023 (2022: £15.7m).
Other payables comprise various balances across the Group including £14.2m of other tax related payables, £3.0m pension
creditors, £4.9m in relation to the fair value of deferred consideration held by Vulcanic and £12.3 other payables.
222
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 19 Provisions
2023
At 1st January 2023
Additional provision in the year
Utilised or released during the year
Exchange adjustments
At 31st December 2023
2022
At 1st January 2022
Additional provision in the year
Utilised or released during the year
Acquisition of subsidiary
Exchange adjustments
At 31st December 2022
Current provisions
Non-current provisions
Total provisions
Product
warranty
£m
Legal,
contractual
and other
£m
2.7
0.4
(0.5)
(0.6)
2.0
15.5
9.3
(8.5)
(1.2)
15.1
Product
warranty
£m
Legal,
contractual
and other
£m
2.1
0.6
(0.9)
0.8
0.1
2.7
4.6
7.9
(2.5)
5.2
0.3
15.5
2023
£m
9.5
7.6
17.1
Total
£m
18.2
9.7
(9.0)
(1.8)
17.1
Total
£m
6.7
8.5
(3.4)
6.0
0.4
18.2
2022
£m
12.0
6.2
18.2
Product warranty
Product warranty provisions reflect commitments made to customers on the sale of goods in the ordinary course of
business. These are expected to be incurred in the next three years.
Legal, contractual and other
Legal, contractual and other provisions mainly comprise amounts provided against open legal and contractual disputes
arising from trade and employment. These costs are based on past experience of similar items and other known factors and
represent management’s best estimate of the likely outcome. The Group has taken action to enforce its rights and protect its
intellectual property rights around the world.
Reflecting the inherent uncertainty within many legal proceedings, the timing and amount of the outflows could differ
significantly from the amount provided. Management does not expect that the outcome of such proceedings, either
individually or in aggregate, will have a material adverse effect on the Group’s financial condition or results of operations.
Of the total legal, contractual and other provisions at 31st December 2023 £8.0m (2022: £9.8m) has been included within
current and £7.1m (2022: £5.7m) within non-current provisions.
20 Called-up share capital and reserves
Ordinary shares of 26 12/13p (2022: 26 12/13p) each:
Authorised 111,428,571 (2022: 111,428,571)
Allotted, called up and fully paid 73,776,048 (2022: 73,776,048)
2023
£m
30.0
19.8
2022
£m
30.0
19.8
35,794 (2022: 28,262) shares with a nominal value of £9,637 (2022: £7,609) were issued in connection with the Group’s
Employee Share Ownership Plan with external consideration of £2.0m (2022: £1.8m) received by the Group. In 2023, all
shares were provided to employees through the Employee Benefit Trust and not through the issue of share capital.
At 31st December 2023, 139,907 shares were held in an Employee Benefit Trust and available for use in connection with the
Group’s Employee Share Schemes. 138 senior employees of the Group have been granted options on Ordinary shares under
the Performance Share Plan (details in Note 22).
Spirax Group Annual Report 2023
223
Financial Statements 20 Called-up share capital and reserves continued
Translation reserve in the Consolidated Statement of Changes in Equity on pages 197-198 is made up as follows:
Net investment hedge reserve
Translation reserve
Total translation reserve
Net investment hedge reserve
Translation reserve
Total translation reserve
1st January
2023
£m
Change
in year
£m
31st December
2023
£m
(2.7)
20.2
17.5
8.3
(86.2)
(77.9)
5.6
(66.0)
(60.4)
1st January
2022
£m
Change
in year
£m
31st December
2022
£m
12.7
(53.2)
(40.5)
(15.4)
73.4
58.0
(2.7)
20.2
17.5
Net investment hedge reserve
The reserve records the cumulative gain or loss on hedging instruments designated in net investment hedges. Together with
the translation reserve, these are the foreign currency translation reserves of the Group.
Other reserves in the Consolidated Statement of Changes in Equity on pages 197-198 are made up as follows:
Cash flow hedges reserve
Capital redemption reserve
Employee Benefit Trust reserve
Total other reserves
Cash flow hedges reserve
Capital redemption reserve
Employee Benefit Trust reserve
Total other reserves
1st January
2023
£m
Change
in year
£m
31st December
2023
£m
(3.7)
1.8
(21.5)
(23.4)
5.0
—
5.5
10.5
1.3
1.8
(16.0)
(12.9)
1st January
2022
£m
Change
in year
£m
31st December
2022
£m
(0.2)
1.8
(19.3)
(17.7)
(3.5)
—
(2.2)
(5.7)
(3.7)
1.8
(21.5)
(23.4)
Cash flow hedges reserve
The reserve records the cumulative net change in the fair value of forward exchange contracts where they are designated
as effective cash flow hedge relationships.
Capital redemption reserve
This reserve records the historical repurchase of the Group’s own shares.
Employee Benefit Trust reserve
The Group has an Employee Benefit Trust which is used to purchase, hold and issue shares in connection with the Group’s
Employee Share Schemes. The shares held in Trust are recorded in this separate reserve.
21 Capital commitments and contingent liabilities
Capital expenditure contracted for but not provided
2023
£m
14.5
2022
£m
67.0
All capital commitments are related to property, plant and equipment and computer software. The Group has no material
contingent liabilities at 31st December 2023 (no material contingent liabilities existed at 31st December 2022), but does
have a non-material contingent liability in relation to tax estimated at approximately £4.0m (2022: £3.8m). See Note 8
for further details.
224
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 22 Employee benefits
Retirement benefit obligations
The Group operates a wide range of retirement benefit arrangements, which are established in accordance with local
conditions and practices within the countries concerned. These include funded defined contribution and funded and
unfunded defined benefit schemes.
Defined contribution arrangements
The majority of the retirement benefit arrangements operated by the Group are of a defined contribution structure, where
the employer contribution and resulting Consolidated Income Statement charge are fixed at a set level or are a set
percentage of employees’ pay. Contributions made to defined contribution schemes and charged to the Consolidated
Income Statement totalled £26.7m (2022: £27.0m). In Germany, following the closure of the defined benefit schemes to new
entrants in 2021, the main scheme for new employees is a defined contribution scheme.
Defined benefit arrangements
The Group operates several funded defined benefit retirement schemes where the benefits are based on employees’ length
of service. Whilst the Group’s primary schemes are in the UK, it also operates other material benefit schemes in the USA as
well as less material schemes elsewhere. In funded arrangements, the assets of defined benefit schemes are held in
separate trustee-administered funds or similar structures in the countries concerned.
UK defined benefit arrangements
The defined benefit schemes in the UK account for 55% (2022: 47%) of the Group’s net liability for defined retirement
benefit schemes. Spirax Group operates three UK schemes: the Spirax-Sarco Employees’ Pension Fund, the Spirax-Sarco
Executives’ Retirement Benefits Scheme and the Watson-Marlow Pension Fund. These are all final salary pension schemes
and are closed to new members. There is a mix of different inflation-dependent pension increases (in payment and
deferment) which vary from member to member according to their membership history and which scheme they are a
member of.
All three schemes have been set up under UK law and are governed by a Trustee committee, which is responsible for the
scheme’s investments, administration and management. A funding valuation is carried out for the Trustees of each scheme
every three years by an independent firm of actuaries. Depending on the outcome of that valuation a schedule of future
contributions is negotiated with Spirax Group. Further information on the contribution commitments is shown in the Financial
Review on pages 36 to 43.
US defined benefit schemes
The Group operates a pension scheme in the USA, which is closed to new entrants and frozen to future accrual. The pension
scheme defines the pension in terms of the highest average pensionable pay for any five consecutive years prior to
retirement. No pension increases (in payment and deferment) are offered by this scheme. It also operates a post-retirement
medical plan in the USA, which is unfunded, as is typical for these plans.
Other matters
In June 2023, the High Court judged that amendments made to the Virgin Media scheme were invalid because the scheme’s
actuary did not provide the associated S37 certificate necessary. This may have a potential impact to the Group but the
impact is not yet known and continues to be assessed.
In October 2023, the Company agreed to a buy-out of the Spirax-Sarco Inc Pension Plan covering approximately 230
pension plan participants. The Plan paid the insurance premium on 31 October 2023 and the insurance company has taken
over benefit obligations effective 1 January 2024. This has been allowed for as a settlement and resulted in a charge to the
profit and loss.
Principal Risks
The pension schemes create a number of risk exposures. Annual increases in benefits are, to a varying extent from scheme
to scheme, dependent on inflation so the main uncertainties affecting the level of benefits payable are future inflation levels
and the actual longevity of the membership. Benefits payable will also be influenced by a range of other factors including
member decisions on matters such as when to retire and the possibility to draw benefits in different forms. A key risk is that
additional contributions are required if the investment returns fall short of those anticipated when setting the contributions
to the pension schemes. All pension schemes are regulated by the relevant jurisdictions. These include extensive legislation
and regulatory mechanisms that are subject to change and may impact on the Group’s pension schemes. The IAS 19 liability
measurement known as defined benefit obligation (DBO) and the service cost are sensitive to the actuarial assumptions
made on a range of demographic and financial matters that are used to project the expected benefit payments, the most
important of these assumptions being the future inflation levels and the assumptions made about life expectation. The DBO
and service cost are also very sensitive to the IAS 19 discount rate, which determines the discounted value of the projected
benefit payments. The discount rate depends on market yields on high quality corporate bonds. Investment strategies are
set with funding rather than IAS 19 considerations in mind and do not seek to provide a specific hedge against the IAS 19
measurement of DBO. As a result the difference between the market value of the assets and the IAS 19 DBO may be volatile.
Further information on the investment strategy for the UK schemes can be found in the Financial Review on pages 36 to 43.
Sensitivity analysis to changes in discount rate and inflation are included on page 229.
Spirax Group Annual Report 2023
225
Financial Statements 22 Employee benefits continued
Principal Risks continued
The financial assumptions used at 31st December were:
Rate of increase in salaries
Rate of increase in pensions
Rate of price inflation
Discount rate
Medical trend rate
Assumptions weighted by value of liabilities % per annum
UK pensions
Overseas pensions
and medical
2023
%
2022
%
2023
%
2022
%
n/a
2.9
3.0
4.5
n/a
n/a
2.9
3.2
4.7
n/a
2.7
2.3
2.2
4.4
7.5
2.9
2.6
2.4
4.7
7.5
The UK pensions are closed to future accrual; therefore, the rate of increase in salaries is not applicable.
The weighted average duration of the defined benefit obligation at 31st December 2023 was approximately 13 years
(2022: 15 years) for the Spirax-Sarco Employees’ Pension Fund, 8 years (2022: 10 years) for the Spirax-Sarco Executives’
Retirement Benefits Scheme and 18 years (2022: 16 years) for the Watson-Marlow Pension Fund.
The mortality assumptions for the material defined benefit schemes at 31st December 2023 and 31st December 2022 were:
Spirax-Sarco Employees’
Pension Fund
At 31st December 2023: 100% of the SAPS 3 normal tables, CMI 2021 future
improvements, 1.25% long term trend, smoothing factor of 7, 0.25% initial addition and a
w parameter of 10%.
At 31st December 2022: 100% of SAPS 3, with CMI 2021 projections with a long-term
trend of 1.25% pa and an initial addition parameter of 0.25% and w2020 parameter of
10%.
Spirax-Sarco Executives’
Retirement Benefits Scheme
At 31st December 2023: 84%/87% (male/female) of SAPS S3 light normal, CMI 2021
future improvements, 1.25% long term trend, smoothing factor of 7, 0.25% initial addition
and a w parameter of 10%.
At 31st December 2022: 84%/87% (male/female) of SAPS S3 light normal, CMI 2021
projections with a long-term trend of 1.25% pa and an initial additional parameter of
0.25% and w2020 parameter of 10%.
Watson-Marlow Pension Fund At 31st December 2023: 102% of the SAPS 3 pensioner tables, CMI 2021 future
improvements, 1.25% long term trend, smoothing factor of 7, 0.25% initial addition and a
w parameter of 10%.
At 31st December 2022: 102% of SAPS S3, CMI 2021 projections with a long-term trend
of 1.25% pa and an initial additional parameter of 0.25% and w2020 parameter of 10%.
US Pension Scheme
At 31st December 2023: SOA Pri-2012 Amount-Weighted Blue Collar Mortality Tables
projected generationally with MP2021
At 31st December 2022: SOA Pri-2012 Amount-Weighted Blue Collar Mortality Tables
with Mortality Improvement Scale MP2021.
By way of example the mortality tables indicate the following life expectancy across the UK schemes:
Current age
65
50
2023 life expectancy at 65
2022 life expectancy at 65
Male
21.9
22.8
Female
24.5
25.5
Male
22.1
23.0
Female
24.6
25.6
The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions which,
due to the timescale covered, may not necessarily be borne out in practice.
226
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 22 Employee benefits continued
Principal Risks continued
The amounts recognised in the Consolidated Statement of Financial Position are determined as follows:
Fair value of schemes’ assets
Present value of funded schemes’ liabilities
Deficit in the funded schemes
Present value of unfunded schemes’ liabilities
Retirement benefit liability recognised in the Consolidated
Statement of Financial Position
Related deferred tax asset
Net pension liability
Fair value of scheme assets
Quoted equities
Quoted bonds
Other
Total with quoted market price
Cash and cash equivalents
Unquoted equities
Unquoted bonds
Real estate
Derivatives
Other
Total other securities
Total market value in aggregate
UK pensions
2023
£m
2022
£m
285.8
284.6
(313.6)
(309.2)
(27.8)
(24.6)
—
—
Overseas pensions
and medical
2023
£m
51.7
(56.9)
(5.2)
(18.4)
2022
£m
57.0
(8.5)
(19.0)
(27.8)
(24.6)
(23.6)
(27.5)
6.9
6.2
6.4
7.0
(20.9)
(18.4)
(17.2)
(20.5)
Total
2023
£m
337.5
2022
£m
341.6
(33.0)
(18.4)
(51.4)
13.3
(38.1)
(33.1)
(19.0)
(52.1)
13.2
(38.9)
(65.5)
(370.5)
(374.7)
UK pensions
Overseas pensions
and medical
Total
2023
£m
44.6
109.0
45.0
198.6
43.8
2.7
0.7
14.4
12.2
13.4
87.2
285.8
2022
£m
46.9
132.5
54.4
233.8
45.9
2.8
—
0.3
—
1.8
50.8
284.6
2023
£m
29.7
15.4
0.5
45.6
0.7
—
—
—
—
5.4
6.1
51.7
2022
£m
30.1
13.1
7.4
50.6
0.6
—
—
—
—
5.8
6.4
57.0
2023
£m
74.3
124.4
45.5
244.2
44.5
2.7
0.7
14.4
12.2
18.8
93.3
337.5
2022
£m
77.0
145.6
61.8
284.4
46.5
2.8
—
0.3
—
7.6
57.2
341.6
The actual return on plan assets was an increase of £20.8m (2022: a decrease of £211.6m).
The UK pensions assets include investments in Liability Driven Investment (LDI) funds. LDI funds allow the schemes to
hedge a larger proportion of the underlying interest rate exposure that exists within the schemes liabilities. As a result of
the structure of LDI funds the schemes may be required to provide additional cash collateral to the LDI funds in order to
maintain the current level of hedging should market interest rates increase materially. The LDI funds of £71.5m (2022: £83.4m)
are included within the quoted bonds in the table above.
The movements in the defined benefit obligation recognised in the Consolidated Statement of Financial Position during the
year were:
UK pensions
Overseas pensions
and medical
2023
£m
2022
£m
2023
£m
2022
£m
Total
2023
£m
2022
£m
Defined benefit obligation at beginning of year
(309.2)
(507.5)
(84.5)
(97.9)
(393.7)
(605.4)
Acquisitions
Current service cost
Interest cost
Administration costs
Remeasurement gain/(loss)
Actual benefit payments
Experience (loss)/gain
Settlements
Currency gain/(loss)
—
—
(14.1)
—
2.7
17.4
—
—
(9.1)
—
207.0
15.9
(10.4)
(15.5)
—
—
—
—
—
(0.1)
(3.8)
(0.6)
(1.5)
5.3
0.4
5.9
3.6
(1.5)
(0.7)
(2.5)
(0.7)
23.0
5.3
(0.5)
—
(9.0)
—
(0.1)
(17.9)
(0.6)
1.2
22.7
(10.0)
5.9
3.6
(1.5)
(0.7)
(11.6)
(0.7)
230.0
21.2
(16.0)
—
(9.0)
Defined benefit obligation at end of year
(313.6)
(309.2)
(75.3)
(84.5)
(388.9)
(393.7)
Spirax Group Annual Report 2023
227
Financial Statements 22 Employee benefits continued
Fair value of scheme assets continued
The movements in the fair value of plan assets during the year were:
UK pensions
Overseas pensions
and medical
Total
Value of assets at beginning of year
Acquisitions
Expected return on assets
Remeasurement gain/(loss)
Contributions paid by employer
Actual benefit payments
Administration costs
Currency (loss)/gain
2023
£m
284.6
—
13.1
1.0
5.3
(17.3)
(0.9)
—
2022
£m
497.5
—
9.0
(210.9)
5.4
(15.9)
(0.5)
—
Value of assets at end of year
285.8
284.6
The estimated employer contributions to be made in 2024 are £6.9m.
The history of experience adjustments is as follows:
2023
£m
57.0
—
2.7
4.0
2.0
(5.4)
(6.0)
(2.6)
51.7
2022
£m
63.2
0.4
1.8
(11.5)
1.8
(5.3)
—
6.6
57.0
2023
£m
341.6
—
15.8
5.0
7.3
(22.7)
(6.9)
(2.6)
2022
£m
560.7
0.4
10.8
(222.4)
7.2
(21.2)
(0.5)
6.6
337.5
341.6
Defined benefit obligation at end of year
Fair value of schemes’ assets
Retirement benefit liability recognised in the Statement of Financial Position
Experience adjustment on schemes’ liabilities
As a percentage of schemes’ liabilities
Experience adjustment on schemes’ assets
As a percentage of schemes’ assets
2023
£m
2022
£m
2021
£m
2020
£m
(388.9)
(393.7)
(605.4)
(630.3)
337.5
(51.4)
(10.0)
2.6%
5.0
1.5%
341.6
(52.1)
(16.0)
4.1%
(222.4)
65.1%
560.7
(44.7)
(2.9)
0.5%
35.7
6.4%
531.7
(98.6)
11.4
1.8%
46.5
8.7%
The expense recognised in the Consolidated Income Statement was as follows:
UK pensions
Overseas pensions
and medical
Total
Current service cost
Administration costs
Net interest on schemes’ liabilities
Total expense recognised in Consolidated Income Statement
2023
£m
—
(0.9)
(1.1)
(2.0)
2022
£m
—
(0.5)
—
(0.5)
2023
£m
(0.1)
(0.6)
(1.0)
(1.7)
2022
£m
(0.7)
(0.7)
(0.8)
(2.2)
The expense is recognised in the following line items in the Consolidated Income Statement:
Operating costs
Net financing expense
Total expense recognised in Consolidated Income Statement
2023
£m
(0.1)
(1.5)
(2.1)
(3.7)
2023
£m
(1.6)
(2.1)
(3.7)
2019
£m
(559.1)
487.8
(71.3)
—
0.0%
49.0
10.0%
2022
£m
(0.7)
(1.2)
(0.8)
(2.7)
2022
£m
(1.9)
(0.8)
(2.7)
228
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 22 Employee benefits continued
Fair value of scheme assets continued
The gain or loss recognised in the Statement of Comprehensive Income (OCI) was as follows:
Remeasurement effects recognised in OCI:
Due to experience on DBO
Due to demographic assumption changes in DBO
Due to financial assumption changes in DBO
Return on assets
Total remeasurement (loss)/gain recognised in OCI
Deferred tax on remeasurement (loss)/gain and change in rate
recognised in OCI
Cumulative loss recognised in OCI at beginning of year
Cumulative loss recognised in OCI at end of year
UK pensions
Overseas pensions
and medical
2023
£m
2022
£m
2023
£m
2022
£m
Total
2023
£m
2022
£m
(10.4)
10.2
(7.5)
1.0
(6.7)
1.7
(54.1)
(59.1)
(15.5)
4.3
202.8
(210.9)
(19.3)
4.8
(39.6)
(54.1)
0.4
—
(1.5)
4.0
2.9
(0.6)
(13.1)
(10.8)
(0.5)
—
23.0
(11.5)
11.0
(3.0)
(21.1)
(13.1)
(10.0)
10.2
(9.0)
5.0
(3.8)
1.1
(67.2)
(69.9)
(16.0)
4.3
225.8
(222.4)
(8.3)
1.8
(60.7)
(67.2)
Sensitivity analysis
The effect on the defined benefit obligation at 31st December 2023 of an increase or decrease in key assumptions is as follows:
(Decrease)/increase in pension deficit:
Discount rate assumption being 1.0% higher
Discount rate assumption being 1.0% lower
Inflation assumption being 1.0% higher
Inflation assumption being 1.0% lower
Mortality assumption life expectancy at age 65 being one year higher
UK pensions
£m
Overseas
pensions and
medical
£m
(36.7)
42.1
25.6
(23.9)
11.1
(7.7)
9.3
1.5
(1.3)
(0.6)
Total
£m
(44.4)
51.4
27.1
(25.2)
10.5
The above sensitivities reflect reasonable possible changes in the assumptions and therefore have been selected on
this basis.
The average age of active participants in the UK schemes at 31st December 2023 was 55 years (2022: 53 years) and in the
overseas schemes 47 years (2022: 47 years).
Cash payments to the pension scheme greater or less than the expense to operating profit
Defined benefit arrangements
Defined contribution arrangements
Total expense recognised in operating costs
Defined benefit arrangements
Defined contribution arrangements
Total contributions paid by employer
Cash payments to the pension scheme greater than the expense to operating profit
2023
£m
(1.6)
(26.7)
(28.3)
7.3
26.7
34.0
5.7
2022
£m
(1.9)
(27.0)
(28.9)
7.2
27.0
34.2
5.3
Share-based payments
Disclosures of the share-based payments offered to employees are set out below. More detail on each scheme is given in
the Annual Report on Remuneration 2023 on pages 162 to 174. The charge to the Consolidated Income Statement in respect
of share-based payments is made up as follows:
Performance Share Plan
Employee Share Ownership Plan
Total expense recognised in Consolidated Income Statement
2023
£m
4.3
1.8
6.1
2022
£m
7.3
1.6
8.9
Spirax Group Annual Report 2023
229
Financial Statements 22 Employee benefits continued
Performance Share Plan
Awards under the Performance Share Plan are made to Executive Directors and other senior managers and take the form of
contingent rights to acquire shares, subject to the satisfaction of a performance target. To the extent that they vest, awards
may be satisfied in cash, in shares or in an option over shares. For the 2022 grant onwards, the performance criteria is split
into three separate parts.
30% of the award is based on a TSR measure where the performance target is based on the Company’s total shareholder
return (TSR) relative to the TSR of other companies included in the FTSE 350 Industrial Goods and Services Supersector
over a three-year performance period where awards will vest on a sliding scale. All shares within an award will vest if the
Company’s TSR is at or above the upper quartile. 18% will vest if the TSR is at the median and the number of shares that
will vest will be calculated pro rata on a straight-line basis between 18% and 100% if the Company’s TSR falls between
the median and the upper quartile. No shares will vest if the Company’s TSR is below the median.
The second part, amounting to 50% of the award, is subject to achievement of a target based on aggregate EPS over
a three-year performance period. 18% will vest if the compound growth in EPS is equal to the growth in global industrial
production (IP) plus 2% as published by CHR Economics, and 100% will vest if the compound growth in EPS is equal to or
exceeds the growth in global IP plus 8% (changing to IP plus 7% from the 2023 grant onwards); there is pro rata vesting
for actual growth between these rates.
The final 20% of the award compares greenhouse gas intensity emission in the base year of the three-year performance
period to the final year. Performance will be measured relative to £m of sales at base year prices to ensure that efficiency
savings are not distorted by inflation. 18% will vest if there is 24% reduction in GHG intensity emission, and 100% will vest
if there is a reduction in GHG intensity emissions equal to or exceeding 31%; there is pro rata vesting for actual reduction
between these rates.
Shares awarded under the Performance Share Plan have been valued using the Monte Carlo simulation valuation
methodology. The relevant disclosures in respect of the Performance Share Plan grants are set out below.
Grant date
Mid-market share price at grant date
Number of employees
Shares under scheme
Vesting period
Probability of vesting
Fair value
2019
Grant
2020
Grant
2021
Grant
2022
Grant
2023
Grant
15th May 12th March
4th May 14th March 13th March
8,161.0p
7,775.0p
11,770.0p
11,910.0p
10,880p
133
104
112,159
140,934
3 years
3 years
74.1%
74.3%
106
89,806
3 years
73.9%
108
138
92,951
145,505
3 years
3 years
76.1%
81.2%
6,048.9p
5,779.2p
8,698.0p
9,057.6p
8,829.1p
Employee Share Ownership Plan
UK employees are eligible to participate in the Employee Share Ownership Plan (ESOP). The aim of the ESOP is to encourage
increased shareholding in the Company by all UK employees and so there are no performance conditions. Employees are
invited to join the ESOP when an offer is made each year. Individuals save for 12 months during the accumulation period and
subscribe for shares at the lower of the price at the beginning and the end of the accumulation period under HMRC rules.
The Company provides a matching share for each share purchased by the individual.
Shares issued under the ESOP have been measured using the Present Economic Value (PEV) valuation methodology.
The relevant disclosures in respect of the Employee Share Ownership Plans are set out below.
Grant date
Exercise price
Number of employees
Shares under scheme
Vesting period
Expected volatility
Risk-free interest rate
Expected dividend yield
Fair value
2019
Grant
2020
Grant
2021
Grant
2022
Grant
2023
Grant
1st October 1st October 1st October 1st October 1st October
7,835.0p
11,102.0p
15,043.3p
10,348.3p
9,413p
1,318
16,820
3 years
21%
0.5%
1.8%
1,373
12,480
3 years
25%
0.1%
1.5%
1,400
9,429
1,671
1,644
16,832
19,256
3 years
3 years
3 years
26.5%
28.7%
26.5%
0.2%
1.0%
4.0%
1.0%
4.9%
1.2%
8,305.1p
11,956.9p
16,382.2p
11,579.7p 10,486.4p
The accumulation period for the 2023 ESOP ends in September 2024; therefore, some figures are projections.
230
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 23 Analysis of changes in net debt, including changes in liabilities arising from
financing activities
2023
Current portion of long-term borrowings
Non-current portion of long-term borrowings
Total borrowings
Lease liabilities
Borrowings
Changes in liabilities arising from financing
Cash at bank
Bank overdrafts
Net cash and cash equivalents
Net debt and lease liability
Net debt excluding lease liability
1st
January
2023
£m
(202.9)
(731.3)
(934.2)
(65.2)
(934.2)
(999.4)
328.9
(85.1)
243.8
(755.6)
(690.4)
Cash flow
£m
Acquired
debt *
£m
Exchange
movement
£m
31st
December
2023
£m
(3.6)
(875.9)
(879.5)
(96.7)
(879.5)
(976.2)
359.7
(146.9)
212.8
(763.4)
(666.7)
16.1
28.3
44.4
46.5
(62.8)
(16.3)
28.1
12.0
(49.9)
—
(49.9)
—
—
—
(49.9)
—
2.3
26.4
28.7
(15.7)
1.0
(14.7)
14.0
11.7
* Debt acquired includes both debt acquired due to acquisition, and debt recognised on the balance sheet due to entry into new leases and
disposals of existing leases
The net cashflow from borrowings of £28.3m consists of £192.8m of new borrowings and £221.1m of repaid borrowings.
During the year £46.9m of interest on external borrowings (2022: £14.0m) was incurred and paid.
At 31st December 2023 total lease liabilities consist of £14.5m (2022: £14.1m) short-term and £82.2m (2022: £51.1m)
long-term.
See Note 27 for further information on net debt and lease liabilities.
2022
Current portion of long-term borrowings
Non-current portion of long-term borrowings
Total borrowings
Lease liabilities
Borrowings
Changes in liabilities arising from financing
Cash at bank
Bank overdrafts
Net cash and cash equivalents
Net debt and lease liability
Net debt excluding lease liability
Cash flow
£m
Acquired
debt *
£m
Disposal of
subsidiaries
£m
Exchange
movement
£m
1st
January
2022
£m
(59.6)
(289.9)
(349.5)
(60.1)
(349.5)
12.9
(497.7)
(409.6)
(484.8)
274.6
(55.6)
219.0
(190.6)
(130.5)
46.3
(26.7)
19.6
(465.2)
(478.1)
(15.2)
(67.0)
(82.2)
—
—
—
(82.2)
(67.0)
—
—
—
(2.8)
—
(2.8)
(2.8)
(2.8)
(2.8)
(20.0)
(22.8)
10.8
(2.8)
8.0
(14.8)
(12.0)
31st
December
2022
£m
(202.9)
(731.3)
(934.2)
(65.2)
(934.2)
(999.4)
328.9
(85.1)
243.8
(755.6)
(690.4)
* Debt acquired includes both debt acquired due to acquisition, and debt recognised on the balance sheet due to entry into new leases
24 Related party transactions
Transactions with Directors are disclosed separately in Note 7 and are shown in the Annual Report on Remuneration 2023
on pages 162 to 174.
There were no other related party transactions in either 2022 or 2023.
Spirax Group Annual Report 2023
231
Financial Statements 25 Purchase of businesses
The provisional fair value accounting is shown below:
2023
During the period the Group acquired distributors resulting in a total cash outflow of £5.2m and creating acquired
intangibles of £3.6m. No other subsidiaries were acquired during 2023.
Additionally, during the period the fair value of the assets acquired as part of the acquisition of Vulcanic (and its related
companies) as well as Durex Industries were reassessed. The outcome of this reassessment was an immaterial decrease in
goodwill for Durex Industries and an offsetting immaterial increase in goodwill for Vulcanic.
2022
Non-current assets:
Property, plant and equipment
Right-of-use assets
Acquired intangibles
Software and other intangibles
Deferred tax assets
Current assets:
Inventories
Trade receivables
Other receivables
Cash and cash equivalents
Total assets
Current liabilities:
Trade payables
Other payables, accruals and provisions
Short-term lease liabilities
Non-current liabilities:
Long-term borrowings
Long-term payables
Long-term lease liabilities
Deferred tax liabilities
Non-current provisions
Post-retirement benefit plans
Total liabilities
Total net assets
Goodwill
Total
Satisfied by:
Cash paid
Total consideration
Cash outflow for acquired businesses in the Statement of Cash Flows:
Cash paid for businesses acquired in the period and debt repaid
Debt repaid
Cash paid for businesses acquired in the period
Less cash acquired
Net cash outflow
232
Spirax Group Annual Report 2023
Cotopaxi
fair value
£m
Vulcanic
fair value
£m
Durex
Industries
fair value
£m
Total
£m
30.7
4.1
244.6
0.5
3.4
15.8
4.1
115.6
0.5
2.9
14.9
—
126.2
—
0.5
138.9
141.6
283.3
17.4
24.5
3.5
10.3
55.7
194.6
7.5
15.9
1.1
24.5
67.0
3.7
3.0
33.4
4.6
1.1
112.8
137.3
57.3
119.2
176.5
176.5
176.5
7.3
9.5
1.2
14.8
32.8
174.4
1.1
7.0
—
8.1
—
—
—
0.1
0.1
—
0.2
8.3
166.1
130.1
296.2
296.2
296.2
24.7
34.8
5.1
25.7
90.3
373.6
8.7
23.5
1.1
33.3
67.0
3.7
3.0
34.1
4.7
1.1
113.6
146.9
226.7
259.3
486.0
486.0
486.0
243.5
296.2
(67.0)
176.5
(10.3)
166.2
—
296.2
(14.8)
281.4
553.0
(67.0)
486.0
(25.7)
460.3
—
—
2.8
—
—
2.8
—
0.8
0.4
0.6
1.8
4.6
0.1
0.6
—
0.7
—
—
—
0.6
—
—
0.6
1.3
3.3
10.0
13.3
13.3
13.3
13.3
—
13.3
(0.6)
12.7
Notes to the Consolidated Financial Statements continuedFinancial Statements 25 Purchase of businesses continued
2022 continued
1.
On a debt-free cash-free basis the cash outflow for acquisitions was £535.5m consisting of £486.0m paid to the
vendors, £67.0m of debt acquired and repaid and £8.2m of acquisition costs less cash acquired of £25.7m.
2. The acquisitions of 100% of Vulcanic (completed on 29th September 2022 for consideration of €200.8m or £176.5m),
100% of Durex Industries (completed on 30th November 2022 for consideration of US$357.1m or £296.2m) and 100% of
Cotopaxi Limited (completed on 30th January 2022 for consideration of £13.3m) have all been accounted for under the
acquisition method. The separately identified intangibles of all three acquisitions are recorded as part of the provisional
fair value adjustment. The acquired intangibles relate to brand names and trademarks, manufacturing designs and core
technology and customer relationships. The goodwill recognised represents the skilled workforce acquired and the
opportunity to achieve synergies from being part of a larger Group.
3. Vulcanic is a European leader in industrial process heating solutions and is highly complementary to Chromalox within
our ETS Business. As the lead brands within ETS for electric process heating, Chromalox and Vulcanic will support the
effective deployment of our industry-leading decarbonisation solutions alongside Steam Thermal Solutions. Goodwill
arising on the acquisition of Vulcanic is not expected to be tax deductible. Following completion of the acquisition,
Vulcanic generated €34.8m (£29.7m) of revenue and €8.3m (£7.1m) of adjusted pre-tax profit. Had the acquisition been
made on 1st January 2022, Vulcanic revenue and adjusted pre-tax profit would have been approximately €111.9m
(£95.5m) and €21.1m (£18.0m) respectively.
4. Durex Industries, located in Illinois (USA), is a specialist in custom electric thermal solutions for ultra-high criticality
industrial equipment and is highly complementary to Thermocoax within our ETS Business. Together, Thermocoax and
Durex Industries are well positioned to capitalise on the growing demand for increasingly stringent thermal energy
requirements in high technology equipment within market sectors with high barriers to entry. Goodwill arising on the
acquisition of Durex Industries is expected to be tax deductible in the USA. Following completion of the acquisition,
Durex Industries generated US$5.6m (£4.5m) of revenue and US$1.2m (£1.0m) of adjusted pre-tax profit. Had the
acquisition been made on 1st January 2022, Durex Industries revenue and adjusted pre-tax profit would have been
approximately US$81.3m (£65.5m) and US$26.4m (£21.3m) respectively.
5.
Cotopaxi Limited is a UK-based digitally enabled global energy consulting and optimisation company, which will enable
Steam Thermal Solutions to digitally enhance its customer bonding through the provision of physical and digital
connections to customers’ infrastructure and equipment. Goodwill arising on the acquisition of Cotopaxi is not expected
to be tax deductible. Following completion of the acquisition, Cotopaxi generated £2.9m of revenue and £0.5m of
pre-tax profit. Had the acquisition been made on 1st January 2022, Cotopaxi revenue and pre-tax profit would not have
been materially different from the figure disclosed.
26 Disposal of subsidiary
2023
No subsidiaries were disposed of during 2023.
2022
The loss on disposal of subsidiaries relates wholly to the disposal of 100% of Spirax Sarco Russia and Watson-Marlow Russia
on 6th July 2022.
The consideration amounted to £nil which resulted in a loss on disposal for Spirax Sarco Russia of £2.2m and for Watson-
Marlow Russia of £1.7m, including £0.1m of legal fees, and cumulative currency translation losses recycled to the
Consolidated Income Statement of £3.2m. £2.8m of cash and cash equivalents were disposed of as part of the transaction.
These disposals did not meet the definition of a discontinued operation given in IFRS 5 Non-current Assets Held for Sale
and Discontinued Operations and, therefore, no disclosures in relation to discontinued operations have been made.
Spirax Group Annual Report 2023
233
Financial Statements 27 Derivatives and other financial instruments
The Group does not enter into significant derivative transactions. The Group’s principal financial instruments comprise
borrowings, cash and short-term deposits. The main purpose of these financial instruments is to raise finance for the
Group’s operations. The Group has various other financial instruments such as trade debtors and trade creditors, which
arise directly from its operations. It is, and has been throughout the period under review, the Group’s policy that no trading
in financial instruments shall be undertaken.
The main risks arising from the Group’s financial instruments are credit risk, interest rate risk, liquidity risk and foreign
currency risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below.
Credit risk
The Group sells products and services to customers around the world and its customer base is extremely varied in size and
industry sector. The Group operates credit control policies to assess customers’ credit ratings and provides for any debt
that is identified as non-collectable.
Interest rate risk
The Group’s policy is to hold a mixture of fixed and floating rate debt. When new debt facilities are entered into, the Group
assesses if this should be fixed or floating depending on the specific circumstances at the time. In addition the Group aims
to achieve a spread of maturity dates in order to avoid the concentration of funding requirements at any one time. The ratio
of fixed to floating rate debt and debt maturity profile is kept under review by the Chief Financial Officer in conjunction with
the Board.
Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts,
loans, facilities and leases as appropriate.
Capital management
The Group’s objective is to ensure support of the Group’s operations and maximise shareholder value. The Group uses cash
generated from operations to invest organically or to finance acquisitions. The capital structure comprises debt and
borrowings (see Note 23), cash and cash equivalents (see Note 23) and equity as disclosed in the Consolidated Statement
of Changes in Equity.
The Group is not subject to externally imposed capital requirements, other than financial covenant requirements on external
borrowing.
Foreign currency risk
The Group has operations around the world and therefore its Consolidated Statement of Financial Position can be affected
significantly by movements in the rate of exchange between sterling and various other currencies particularly the US dollar
and euro. The Group seeks to mitigate the effect of this structural currency exposure by borrowing in these currencies
where appropriate while maintaining a low cost of debt. In addition the Group employs net investment hedge accounting
where appropriate to mitigate these exposures, with such hedges being designated in both 2023 and 2022. The gain on net
investment hedges during 2023 included in the Consolidated Statement of Comprehensive Income was £8.3m (2022:
£15.4m loss). This is included within translation reserves in the Consolidated Statement of Changes in Equity (see Note 20).
The Group also has transactional currency exposures principally as a result of trading between Group companies. Such
exposures arise from sales or purchases by an operating unit in currencies other than the unit’s functional currency. The
Group operates a programme to manage this risk on a Group-wide net basis, through the entering into of both forward
contracts and non-deliverable forward contracts with a range of bank counterparties.
Fair values of financial assets and financial liabilities
Fair values of financial assets and liabilities at 31st December 2023 are not materially different from book values due to their
size or the fact that they were at short-term rates of interest. Fair values have been assessed as follows:
• Derivatives
Forward exchange contracts are marked to market by discounting the future contracted cash flows using readily available
market data.
• Interest-bearing loans and borrowings
Fair value is calculated based on discounted expected future principal and interest cash flows.
• Lease liabilities
The fair value is estimated as the present value of future cash flows, discounted at the incremental borrowing rate for the
related geographical location unless the rate implicit in the lease is readily determinable.
• Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value.
234
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 27 Derivatives and other financial instruments continued
Fair values of financial assets and financial liabilities continued
The following table compares amounts and fair values of the Group’s financial assets and liabilities:
Financial assets:
Cash and cash equivalents
Trade, other receivables and contract assets
Total financial assets
Financial liabilities:
Borrowings
Lease liabilities
Bank overdrafts
Trade payables
Other payables and contract liabilities
Long-term payables
Accruals
Total financial liabilities
2023
Carrying
value
£m
359.7
346.3
706.0
2023
Carrying
value
£m
879.5
96.7
146.9
79.2
67.3
11.4
95.2
2023
Fair
value
£m
359.7
346.3
706.0
2023
Fair
value
£m
888.5
96.7
146.9
79.2
67.3
11.4
95.2
2022
Carrying
value
£m
328.9
395.2
724.1
2022
Carrying
value
£m
934.2
65.2
85.1
89.9
70.5
8.8
113.2
2022
Fair
value
£m
328.9
395.2
724.1
2022
Fair
value
£m
918.1
65.2
85.1
89.9
70.5
8.8
113.2
1,376.2
1,385.2
1,366.9
1,350.8
There are no other assets or liabilities measured at fair value on a recurring or non-recurring basis for which fair value is disclosed.
Derivative financial instruments are measured at fair value. Fair value of derivative financial instruments is calculated based
on discounted cash flow analysis using appropriate market information for the duration of the instruments.
Financial instruments fair value disclosure
Fair value measurements are classified into three levels, depending on the degree to which the fair value is observable:
• Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets and liabilities
• Level 2 fair value measurements are those derived from other observable inputs for the asset or liability
• Level 3 fair value measurements are those derived from valuation techniques using inputs that are not based on
observable market data
With the exception of the Group’s private placement borrowings, there were no significant differences between the carrying
value and the fair value of the Group’s financial assets and liabilities. The fair value of private placement borrowings is
estimated by discounting the future contracted cash flows using readily available market data and represents a Level 2
measurement in the fair value hierarchy.
We consider that the derivative financial instruments also fall into Level 2.
Interest rate risk profile of financial liabilities
The interest rate profile of the financial liabilities of the Group as at 31st December was as follows:
2023
Euro
US dollar
Sterling
Renminbi
Other
Group total
Fixed rate
financial
liabilities
£m
Floating rate
financial
liabilities
£m
Financial
liabilities on
which no
interest is paid
£m
628.8
310.7
20.7
5.1
16.2
66.7
1.8
90.1
—
1.2
63.3
50.7
38.2
34.4
48.3
Total
£m
758.8
363.2
149.0
39.5
65.7
1,376.2
981.5
159.8
234.9
Spirax Group Annual Report 2023
235
Financial Statements 27 Derivatives and other financial instruments continued
Interest rate risk profile of financial liabilities continued
2022
Euro
US dollar
Sterling
Renminbi
Other
Group total
Terms and debt repayment schedule
The terms and conditions of outstanding borrowings were as follows:
Fixed rate
financial
liabilities
£m
Floating rate
financial
liabilities
£m
Financial
liabilities on
which no
interest is paid
£m
642.2
283.6
21.0
2.0
18.3
967.1
44.9
3.0
36.3
—
36.1
75.8
55.3
50.0
44.3
54.1
120.3
279.5
Total
£m
762.9
341.9
107.3
46.3
108.5
1,366.9
Unsecured private placement – €225.0m
Unsecured private placement – $185.0m
Unsecured bank facility – $150.0m
Unsecured private placement – €140.0m
Unsecured private placement – €125.0m
Unsecured private placement – €120.0m
Unsecured private placement – €110.0m
Unsecured bank facility – €90.0m
Unsecured bank facility
Unsecured bank facility
Unsecured bank facility
Unsecured bank facility
Unsecured bank facility
Unsecured bank facility
Unsecured bank facility
Unsecured bank facility
Currency
Nominal
interest rate
Year
of maturity
2023
Carrying value
£m
2022
Carrying value
£m
€
$
$
€
€
€
€
€
€
£
€
£
€
€
€
$
1.1%
5.3%
6.8%
3.9%
4.2%
2.4%
4.4%
4.7%
4.6%
5.6%
3.9%
5.9%
0.0%
3.9%
3.9%
5.2%
2023
2028
2025
2027
2029
2026
2030
2026
2029
2024
2024
2029
2023
2024
2024
2024
—
145.3
117.8
124.7
108.4
104.4
95.4
78.0
95.5
81.7
64.4
10.0
—
0.5
0.2
0.1
202.0
152.9
124.0
123.9
110.6
106.2
—
—
79.6
39.3
38.5
35.0
5.2
2.0
0.1
—
Total outstanding borrowings
1,026.4
1,019.3
In 2023, the Group refinanced the €225m unsecured private placement, refinancing consisted of a bank term loan of €90m
and a unsecured private placement of €110m. In 2022, New private placement borrowings of €265.0m (£234.6m) and
US$185.0m (£149.8m) along with a term loan of US$150.0m (£124.4m) all relate to the funding of acquisitions made during
the year.
The weighted average interest rate paid during the year was 4.6% (2022: 3.3%).
236
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 27 Derivatives and other financial instruments continued
Interest rate risk profile of financial assets
The interest rate profile of the financial assets of the Group as at 31st December was as follows:
2023
Euro
US dollar
Sterling
Renminbi
Other
Group total
2022
Euro
US dollar
Sterling
Renminbi
Other
Group total
Fixed rate
financial
assets
£m
Floating
rate
financial
assets
£m
Financial assets
on which no
interest is
earned
£m
7.9
1.1
0.1
2.8
11.3
23.2
76.5
1.7
16.4
23.4
41.4
159.4
127.2
190.7
25.3
41.4
138.8
523.4
Fixed rate
financial
assets
£m
Floating
rate
financial
assets
£m
Financial assets
on which no
interest is
earned
£m
0.2
0.8
0.1
6.4
8.6
16.1
62.2
36.4
19.6
41.1
22.7
182.0
143.4
149.1
29.8
44.9
158.8
526.0
Total
£m
211.6
193.5
41.8
67.6
191.5
706.0
Total
£m
205.8
186.3
49.5
92.4
190.1
724.1
Financial assets on which no interest is earned comprise trade and other receivables and cash at bank. Floating and fixed
rate financial assets comprise cash at bank or cash placed on deposit.
Currency exposures
As explained on page 234, the Group’s objectives in managing the currency exposures arising from its net investment
overseas (in other words, its structural currency exposures) are to maintain a low cost of debt while partially hedging against
currency depreciation. All gains and losses arising from these structural currency exposures are recognised in the
Consolidated Statement of Comprehensive Income. In addition the Group employs net investment hedge accounting in
order to mitigate these impacts where appropriate.
Transactional (or non-structural) exposures give rise to net currency gains and losses that are recognised in the
Consolidated Income Statement. Such exposures include the monetary assets and monetary liabilities in the Consolidated
Statement of Financial Position that are not denominated in the operating (or functional) currency of the operating unit
involved. At 31st December 2023 the currency exposure in respect of the euro was a net monetary liability of £69.2m
(2022: £280.8m net monetary liability) and in respect of the US dollar a net monetary liability of £254.2m (2022: £225.0m
net monetary liability).
At 31st December 2023, the percentage of debt to net assets, excluding debt, was 56% (2022: 53%) for the euro and 8%
(2022: 7%) for the US dollar.
Maturity of financial liabilities
The Group’s financial liabilities at 31st December mature in the following periods:
2023
In six months or less, or on demand
In more than six months but no more than twelve
In more than one year but no more than two
In more than two years but no more than three
In more than three years but no more than four
In more than four years but no more than five
In more than five years
Total contractual cash flows
Statement of Financial Position values
Trade, other
payables, accruals
and contract
liabilities
£m
Overdrafts
£m
Lease
liabilities
£m
Long-term
borrowings
233.4
146.9
9.0
2.1
6.2
1.5
0.2
0.7
—
—
—
—
—
—
253.1
253.1
146.9
146.9
9.6
9.1
16.3
13.8
11.2
7.9
56.4
124.3
96.7
Total
£m
392.6
19.3
138.2
203.4
135.6
153.4
367.1
2.7
1.2
119.8
183.4
122.9
145.3
310.0
885.3
1,409.6
879.5
1,376.2
Spirax Group Annual Report 2023
237
Financial Statements 27 Derivatives and other financial instruments continued
Maturity of financial liabilities continued
2022
In six months or less, or on demand
In more than six months but no more than twelve
In more than one year but no more than two
In more than two years but no more than three
In more than three years but no more than four
In more than four years but no more than five
In more than five years
Total contractual cash flows
Statement of Financial Position values
Trade, other
payables
and contract
liabilities
£m
Overdrafts
£m
Lease
liabilities
£m
Long-term
borrowings
271.0
85.1
6.8
1.7
1.3
0.8
—
0.8
282.4
282.4
—
—
—
—
—
—
85.1
85.1
7.9
7.0
10.9
7.7
5.6
4.2
28.1
71.4
65.2
Total
£m
401.3
215.2
96.8
156.0
113.9
345.7
171.5
37.3
201.4
84.2
147.0
107.5
341.5
142.6
1,061.5
934.2
1,500.4
1,366.9
The Group did not employ any supply chain or similar forms of financing during 2023 or 2022.
Cash flow hedges
The Group uses forward currency contracts to manage its exposure to movements in foreign exchange rates. The forward
contracts are designated as hedging instruments in a cash flow hedging relationship. At 31st December 2023 the Group
had contracts outstanding to economically hedge or to purchase £18.6m (2022: £38.9m) and €16.1m (2022: €12.9m) with
US dollars, £67.6m (2022: £70.4m) with euros, £24m (2022: £20.3m) and €8.8m (2022: €8.4m) with Chinese renminbi,
£8.5m (2022: £10.6m) and €3.4m (2022: €3.4m) with Korean won, £3.7m (2022: £2.5m) with Singapore dollars and DKK8.2m
(2022: DKK54.2m) with euros. The fair values at the end of the reporting period were a asset of £1.8m (2022: £3.7m liability),
included within trade and other payables on the Consolidated Statement of Financial Position. The fair value of cash flow
hedges falls into the Level 2 category of the fair value hierarchy in accordance with IFRS 13. The fair value of derivative
financial instruments is estimated by discounting the future contracted cash flow using readily available market data.
The contractual cash flows on forward currency contracts at the reporting date are shown below, classified by maturity.
The cash flows shown are on a gross basis and are not discounted.
2023
Contracted cash in/(out):
Sterling
Euro
US dollar
Other
Total contractual cash flows
2022
Contracted cash in/(out):
Sterling
Euro
US dollar
Other
Total contractual cash flows
Less than
6 months
£m
6 to 12
months
£m
More than
12 months
£m
54.9
(20.5)
(13.6)
(19.6)
1.2
67.5
(22.3)
(18.8)
(24.9)
1.5
—
—
—
—
—
Less than
6 months
£m
6 to 12
months
£m
More than
12 months
£m
72.8
(30.4)
(23.7)
(22.8)
(4.1)
70.0
(26.2)
(27.9)
(20.8)
(4.9)
—
—
—
—
—
Total
£m
122.4
(42.8)
(32.4)
(44.5)
2.7
Total
£m
142.8
(56.6)
(51.6)
(43.6)
(9.0)
It is anticipated that the cash flows will take place at the same time as the corresponding forward contract matures. At this
time the amount deferred in equity will be reclassified to profit or loss.
All forecast transactions which have been subject to hedge accounting during the year have occurred or are still expected
to occur.
A gain on derivative financial instruments of £5.0m (2022: £3.5m loss) was recognised in other comprehensive income
during the period.
As at 31st December 2023 no ineffectiveness has been recognised in profit or loss arising from hedging foreign
currency transactions.
238
Spirax Group Annual Report 2023
Notes to the Consolidated Financial Statements continuedFinancial Statements 27 Derivatives and other financial instruments continued
Borrowing facilities
The Group has various borrowing facilities available to it. The undrawn committed facilities available at 31st December in
respect of which all conditions precedent had been met at that date were as follows:
Expiring in one year or less
Expiring in more than one year but no more than two years
Expiring in more than two years but no more than three years
Expiring in more than three years
Total Group undrawn committed facilities
2023
£m
—
—
—
294.5
294.5
2022
£m
—
—
—
285.4
285.4
At 31st December 2023, the Group had available £294.5m (2022: £285.4m) of undrawn committed borrowing facilities in
respect of its £400.0m (2022: £400.0m) pound sterling revolving credit facility, of which all conditions precedent had been
met. This facility expires on 13th April 2029.
Sensitivity analysis
In managing interest rate and currency risks, the Group aims to reduce the impact of short-term fluctuations on the Group’s
earnings. Over the longer term, however, permanent changes in foreign exchange and interest rates would have an impact
on consolidated earnings. At the year end borrowings totalled £1,026.4m (2022: £1,019.3m). At 31st December 2023, it is
estimated that a general increase of one percentage point in interest rates would decrease the Group’s profit after tax and
equity by approximately £2.3m (2022: £1.7m).
For the year ended 31st December 2023, it is estimated that a decrease of five percentage points in the value of sterling
weighted in relation to the Group’s profit and trading flows would have decreased the Group’s profit before tax by
approximately £18.5m (2022: increased by £17.0m). The effect can be very different between years due to the weighting of
different currency movements. Forward exchange contracts have been included in this calculation.
The credit risk profile of trade receivables
The ageing of trade receivables at the reporting date was:
Not past due date
0–30 days past due date
31–90 days past due date
91 days to one year past due date
More than one year
Group total
Gross
2023
£m
236.6
35.0
17.3
13.9
7.3
310.1
Impairment
2023
£m
(1.0)
(0.2)
(0.1)
(1.7)
(7.3)
Net
2023
£m
235.6
34.8
17.2
12.2
—
Gross
2022
£m
236.2
48.8
29.0
26.9
13.9
(10.3)
299.8
354.8
Impairment
2022
£m
(1.8)
(0.1)
(0.1)
(1.3)
(10.4)
(13.7)
Net
2022
£m
234.4
48.7
28.9
25.6
3.5
341.1
Other than those disclosed above no other impairment losses on receivables and contract assets arising from contracts with
customers have been recognised. Other than trade receivables there are no financial assets that are past their due date at
31st December 2023.
Payment terms across the Group vary depending on the geographic location of each operating company. Payment is
typically due between 20 and 90 days after the invoice is issued.
All contracts with customers do not contain a significant financing component.
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Balance at 1st January
Additional impairment
Amounts written off as uncollectable
Amounts recovered
Impairment losses reversed
Exchange differences
Balance at 31st December
2023
£m
13.7
3.0
(0.4)
(0.4)
(5.1)
(0.5)
10.3
2022
£m
12.9
1.0
(0.3)
(0.6)
(0.3)
1.0
13.7
Spirax Group Annual Report 2023
239
Financial Statements Appendix
In this section
241 Appendix: Alternative performance measures
240
Spirax Group Annual Report 2023
Financial Statements Appendix: Alternative performance measures
The Group reports under International Financial Reporting Standards (IFRS) and also uses alternative performance measures
where the Board believes that they help to effectively monitor the performance of the Group and users of the Financial
Statements might find them informative. Certain alternative performance measures also form a meaningful element of
Executive Directors’ variable remuneration. Please see the Annual Report on Remuneration 2023 on pages 162 to 174 for
further detail. A definition of the alternative performance measures and a reconciliation to the closest IFRS equivalent are
disclosed below. The term ‘adjusted’ is not defined under IFRS and may therefore not be comparable with similarly titled
measures reported by other companies. Adjusted performance measures are not considered to be a substitute for, or
superior to, IFRS measures.
Adjusted operating profit
Adjusted operating profit excludes items that are considered to be significant in nature and/or quantum at either a Group or
an operating segment level and where treatment as an adjusted item provides all our stakeholders with additional useful
information to assess the period-on-period trading performance of the Group. The Group excludes such items including
those defined as follows:
• Amortisation and impairment of acquisition-related intangible assets
• Costs associated with the acquisition or disposal of businesses
• Gain or loss on disposal of a subsidiary and/or disposal groups
• Reversal of acquisition-related fair value adjustments to inventory
• Changes in deferred and contingent consideration payable on acquisitions
• Costs associated with a material restructuring programme
• Material gains or losses on disposal of property
• Accelerated depreciation, impairment and other related costs on non-recurring, material property redevelopments
• Material non-recurring pension costs or credits
• Costs or credits arising from regulatory and litigation matters
• Other material items which are considered to be non-recurring in nature and/or are not a result of the underlying trading
of the business
• Related tax effect on adjusting items above and other tax items which do not form part of the underlying tax rate
A reconciliation between operating profit as reported under IFRS and adjusted operating profit is given below.
Operating profit as reported under IFRS
Amortisation of acquisition-related intangible assets
Significant software related impairment
Acquisition-related items
Restructuring costs
Asset related impairment
Reversal of acquisition-related fair value adjustments to inventory
Disposal of associate
Disposal of subsidiaries in Russia
Accelerated depreciation and other related costs on one-off property redevelopments
Total adjusting items
Adjusted operating profit
2023
£m
284.4
37.2
13.9
5.7
5.2
1.8
1.3
(0.4)
—
—
64.7
349.1
2022
£m
318.8
23.7
—
9.1
15.5
—
1.8
—
7.1
4.2
61.4
380.2
Spirax Group Annual Report 2023
241
Financial Statements Appendix: Alternative performance measures continued
Adjusted earnings per share
Profit for the year attributable to equity holders as reported under IFRS (£m)
Items excluded from adjusted profit (£m)
Tax effects on adjusted items (£m)
Adjusted profit for the year attributable to equity holders (£m)
Weighted average shares (million)
Basic adjusted earnings per share
Diluted weighted average shares (million)
Diluted adjusted earnings per share
2023
183.6
64.7
(18.3)
230.0
73.6
2022
224.7
62.5
(9.4)
277.8
73.6
312.4p
377.2p
73.8
73.8
311.8p
376.3p
Basic adjusted earnings per share are defined as adjusted profit for the period attributable to equity holders divided by the
weighted average number of shares. Diluted adjusted earnings per share are defined as adjusted profit for the period
attributable to equity holders divided by the diluted weighted average number of shares. Basic and diluted EPS calculated
on an IFRS profit basis are included in Note 9.
Dividend cover
The Group monitors dividend cover to ensure this remains within the Group’s expected range. Dividend cover is calculated
as adjusted earnings per share divided by dividends per share.
Adjusted cash flow
A reconciliation showing the items that bridge between net cash from operating activities as reported under IFRS to an
adjusted basis is given below. Adjusted cash from operations is used by the Board to monitor the performance of the Group,
with a focus on elements of cash flow, such as net capital expenditure, which are subject to day-to-day control by the business.
Net cash from operating activities as reported under IFRS
Restructuring and acquisition-related costs
Net capital expenditure excluding acquired intangibles from acquisitions
Income tax paid
Repayments of principal under lease liabilities
Adjusted cash from operations
2023
£m
298.6
10.8
2022
£m
241.1
10.2
(102.3)
(113.5)
90.7
(16.1)
281.7
90.0
(12.9)
214.9
Adjusted cash conversion in 2023 is 81% (2022: 57%). Cash conversion is calculated as adjusted cash from operations
divided by adjusted operating profit. The adjusted cash flow is included in the Financial Review on page 40. The impact of
adjustments to operating profit as reported under IFRS of £64.7m (2022: £61.4m) on net change in cash and cash
equivalents is a total outflow of £5.6m (2022: £13.5m). Included within cash generated from operations is acquisition-related
items of £0.8m and restructuring costs of £5.2m. Included within net cash used in investing activities is profit on disposal of
businesses of £0.4m.
Cash generation
Cash generation is one of the Group’s key performance indicators used by the Board to monitor the performance of the
Group and measure the successful implementation of our strategy. It is one of two financial measures on which Executive
Directors’ variable remuneration is based.
Cash generation is calculated as adjusted operating profit after adding back depreciation and amortisation, less cash
payments to pension schemes in excess of the charge to operating profit, equity settled share plans, net capital expenditure
excluding acquired intangibles, working capital changes and repayment of principal under lease liabilities. Cash generation
is equivalent to adjusted cash from operations, a reconciliation between this and net cash from operating activities as
reported under IFRS is shown in the table above.
Return on invested capital (ROIC) and return on capital employed (ROCE)
The Group distinguishes between invested capital and capital employed when calculating return on capital. Invested capital
represents the total capital invested in the business and is equal to total equity plus net debt and therefore includes the
impact of acquisitions and disposals. Capital employed is invested capital less certain non-current assets and non-current
liabilities and therefore reflects capital that is more operational in nature. Both of these return metrics are used to ensure a
full assessment of business performance.
242
Spirax Group Annual Report 2023
Financial Statements Return on invested capital (ROIC)
ROIC measures the post-tax return on the total capital invested in the Group. It is calculated as adjusted operating profit
after tax divided by average invested capital. Average invested capital is defined as the average of the closing balance at
the current and prior year end. Taxation is calculated as adjusted operating profit multiplied by the adjusted effective tax rate.
An analysis of the components is as follows:
Total equity
Net debt including lease liabilities
Total invested capital
Average invested capital
Average invested capital (excluding acquisitions, disposals and leases)
Operating profit as reported under IFRS
Adjustments (see adjusted operating profit)
Adjusted operating profit
Taxation
Adjusted operating profit after tax
Adjusted operating profit after tax (excluding acquisitions, disposals and leases)
Return on invested capital
Return on invested capital (excluding acquisitions, disposals and leases)
2023
£m
1,157.7
763.4
1,921.1
1,923.2
1,336.4
284.4
64.7
349.1
2022
£m
1,169.8
755.6
1,925.4
1,563.0
1,263.8
318.8
61.4
380.2
(89.0)
(94.9)
260.1
236.7
13.5%
17.7%
285.3
277.6
18.3%
22.0%
Return on capital employed (ROCE)
ROCE measures effective management of fixed assets and working capital relative to the profitability of the Group. It is
calculated as adjusted operating profit divided by average capital employed. Average capital employed is defined as the
average of the closing balance at the current and prior year end. More information on ROCE can be found in the Capital
Employed and ROCE sections of the Financial Review on pages 39 and 40.
An analysis of the components is as follows:
Property, plant and equipment
Right-of-use assets
Software and development costs
Prepayments
Inventories
Trade receivables
Other current assets
Tax recoverable
Trade, other payables and current provisions
Current tax payable
Capital employed
Average capital employed
Average capital employed (excluding acquisitions, disposals and leases)
Operating profit
Adjustments (see adjusted operating profit on page 241)
Adjusted operating profit
Adjusted operating profit (excluding acquisitions, disposals and leases)
Return on capital employed
Return on capital employed (excluding acquisitions, disposals and leases)
2023
£m
415.1
98.4
42.3
1.9
285.2
299.8
71.4
13.6
2022
£m
384.5
67.2
44.5
2.0
290.0
341.1
79.6
19.0
(260.7)
(295.0)
(28.3)
(40.4)
938.7
915.6
772.4
284.4
64.7
349.1
317.7
38.1%
41.1%
892.5
775.9
677.5
318.8
61.4
380.2
369.9
49.0%
54.6%
Spirax Group Annual Report 2023
243
Financial Statements Appendix: Alternative performance measures continued
Return on capital employed (ROCE) continued
A reconciliation of capital employed to net assets as reported under IFRS and disclosed in the Consolidated Statement of
Financial Position is given below.
Capital employed
Goodwill and acquired intangibles
Investment in associate
Post-retirement benefits
Net deferred tax
Non-current provisions and long-term payables
Lease liabilities
Net debt
Net assets as reported under IFRS
2023
£m
938.7
1,087.0
3.0
(51.4)
(37.2)
(19.0)
(96.7)
2022
£m
892.5
1,159.1
—
(52.1)
(59.1)
(15.0)
(65.2)
(666.7)
(690.4)
1,157.7
1,169.8
Net debt including lease liabilities
A reconciliation between net debt and net debt including lease liabilities is given below. A breakdown of the balances that
are included within net debt is given within Note 23. Net debt excludes lease liabilities to be consistent with how net debt is
defined for external debt covenant purposes, as well as to enable comparability with prior years.
Net debt
Lease liabilities
Net debt and lease liabilities
2023
£m
666.7
96.7
763.4
2022
£m
690.4
65.2
755.6
Net debt to earnings before interest, tax, depreciation and amortisation (EBITDA)
To assess the size of the net debt balance relative to the size of the earnings for the Group, we analyse net debt as a
proportion of EBITDA. EBITDA is calculated by adding back depreciation and amortisation of owned property, plant and
equipment, software and development and the 12 month proforma EBITDA impact of acquisitions and disposals to adjusted
operating profit. Net debt is calculated as cash and cash equivalents less bank overdrafts and external borrowings
(excluding lease liabilities). The net debt to EBITDA ratio is calculated as follows:
Adjusted operating profit
Depreciation and amortisation of property, plant and equipment, software and development
Acquisitions and disposals proforma basis (EBITDA)
Earnings before interest, tax, depreciation and amortisation
Net debt
Net debt to EBITDA
The components of net debt are disclosed in Note 23.
2023
£m
349.1
44.2
—
393.3
666.7
1.7
2022
£m
380.2
37.4
33.7
451.3
690.4
1.5
Organic measures
As we are a multi-national Group of companies, who trade in a large number of currencies and also acquire and sometimes
dispose of companies, we also refer to organic performance measures throughout the Annual Report. These strip out the
effects of the movement in exchange rates and of acquisitions and disposals. The Board believe that this allows users of the
accounts to gain a further understanding of how the Group has performed. Exchange translation movements are assessed
by re-translating prior period reported values to current period exchange rates. Exchange transaction impacts on operating
profit are assessed on the basis of transactions being at constant currency between years.
The incremental impact of any acquisitions that occurred in either the current period or prior period is excluded from the
organic results of the current period at current period exchange rates. For any disposals that occurred in the current or prior
period, the current period organic results include the difference between the current and prior period financial results only
for the like-for-like period of ownership.
The organic percentage movement is calculated as the organic movement divided by the prior period at current period
exchange rates, excluding disposals for the non-like-for-like period of ownership. The organic bps change in adjusted
operating margin is the difference between the current period margin, excluding the incremental impact of acquisitions, and
the prior period margin excluding disposals for the non-like-for-like period of ownership at current period exchange rates.
244
Spirax Group Annual Report 2023
Financial Statements Organic measures continued
A reconciliation of the movement in revenue and adjusted operating profit compared to the prior period is given below.
Revenue
Adjusted operating profit
Adjusted operating margin
2022
£m
Exchange
£m
1,610.6
380.2
23.6%
(27.2)
(7.1)
Organic
£m
(16.0)
(45.9)
Acquisitions
and disposals ¹
£m
115.2
21.9
2023
£m
1,682.6
349.1
Organic
Reported
-1%
-12%
+4%
-8%
20.7% -270 bps
-290 bps
1 Results include the impact of (i) the acquisition of Vulcanic and Durex Industries and (ii) the treatment of our Russian operating companies as
disposals from the date at which the Group suspended all trading with and within Russia.
The term ‘sales’ is used interchangeably with ‘revenue’ when describing the financial performance of the business. Drop
through is calculated as the organic increase in adjusted operating profit divided by the organic increase in revenue. The
reconciliation for each segment is included in the Strategic Report.
Proforma Revenue
Due to the disposal of our Russian operating companies and the acquisitions of Cotopaxi Limited, Vulcanic and Durex
Industries, our reported financial results for 2022 only include the impact of these operations for the period of ownership by
the Group. The table below reconciles between statutory revenue as reported within the Consolidated Income Statement,
and the 2022 proforma revenue had all acquisition and disposal transactions occurred on 1st January 2022. This allows
users of the accounts to compare 2023 revenue to 2022 revenue on a like-for-like basis.
Steam Thermal Solutions
Electric Thermal Solutions
Watson-Marlow
Total
Revenue (statutory)
£m
866.0
256.1
488.5
1,610.6
Proforma adjustments*
£m
(1.2)
126.8
(1.9)
123.7
Revenue (proforma)
£m
Proportion of Group
864.8
382.9
486.6
1,734.3
50%
22%
28%
* Includes the 2022 pre-acquisition financial results of Cotopaxi Limited, Vulcanic and Durex Industries, and the removal of the 2022 statutory
results of our Russian operating companies disposed
Analysis by operating segment
2023
Steam Thermal Solutions
Electric Thermal Solutions
Watson-Marlow
Corporate
Total
Net financing expense
Share of (loss)/profit of Associate
Profit before tax
2022
Steam Thermal Solutions
Electric Thermal Solutions
Watson-Marlow
Corporate
Total
Net financing expense
Share of (loss)/profit of Associate
Profit before tax
Revenue
£m
910.1
378.5
394.0
—
1,682.6
Revenue
£m
866.0
256.1
488.5
—
1,610.6
Adjusted
operating
profit
£m
Adjusted
operating
margin
%
24.6%
15.6%
23.8%
20.7%
Adjusted
operating
margin
%
23.8%
15.6%
32.8%
23.6%
224.0
59.2
93.7
(27.8)
349.1
(39.9)
—
309.2
Adjusted
operating
profit
£m
206.1
39.9
160.0
(25.8)
380.2
(9.6)
—
370.6
Spirax Group Annual Report 2023
245
Financial Statements Appendix: Alternative performance measures continued
Operating costs
Cost of inventories recognised as an expense
Staff costs (Note 4)
Depreciation, amortisation and impairment
Other operating charges
Total operating costs
2023
Adjusted
£m
2023
Adjustments
£m
401.2
630.4
60.4
241.5
1,333.5
1.3
—
52.3
11.1
64.7
2023
Total
£m
402.5
630.4
112.7
252.6
2022
Adjusted
£m
2022
Adjustments
£m
381.2
570.3
50.9
228.0
3.9
—
30.1
27.4
61.4
2022
Total
£m
385.1
570.3
81.0
255.4
1,291.8
1,398.2
1,230.4
Total cost of inventories recognised as an expense includes the reversal of acquisition-related fair value adjustments to
inventory £1.3m (2022: £1.8m) and in the previous period the write down of inventory resulting from the closure of
Chromalox’s manufacturing operations in Soissons (France) of £2.1m.
Total depreciation, amortisation and impairment includes amortisation of acquisition-related intangible assets of £37.2m
(2022: £23.7m), an impairment of software related assets of £13.9m and an impairment of assets within Watson-Marlow as a
result of the restructure in the business of £1.8m as well as profit on the sale of the Chromalox’s manufacturing operations in
Soissons of £0.6m which had been fully impaired in the prior year. In the previous period it included accelerated
depreciation on one-off property redevelopments of £3.9m and impairment charges resulting from the closure of
Chromalox’s manufacturing operations in Soissons (France) of £2.5m.
Total other operating charges include restructuring costs of £7.5m in Watson-Marlow to right-size manufacturing capacity
as well as a credit of £1.7m for the release of restructuring costs booked in the previous period for the closure of
Chromalox’s manufacturing operations in Soissons (France) (2022: £10.9m). Total operating charges also include
acquisition-related items of £5.7m (2022: £9.1m) relating to the acquisition of Vulcanic and Gestra Malaysia and profits on
the disposal of Econotherms (UK) Ltd, an associate investment, of £0.4m. In the previous period, other operating charges
included cost of £7.1m relating to the disposal of subsidiaries in Russia and costs of £0.3m on one-off property
redevelopments. Operating costs include exchange difference gains of £1.8m (2022: £5.1m).
The reconciliation for each operating segment for adjusting items is analysed below:
2023
Amortisation
of acquisition-
related
intangible
assets
£m
Reversal of
acquisition-
related fair
value
adjustments
to inventory
£m
Restructuring
costs
£m
Acquisition
related items
£m
Disposal of
associate
£m
Impairments
£m
Steam Thermal Solutions
Electric Thermal Solutions
Watson-Marlow
Corporate
Total
(4.5)
(29.5)
(3.2)
—
(37.2)
—
(1.3)
—
—
(1.3)
—
2.3
(7.5)
—
(5.2)
(0.4)
(4.9)
—
(0.4)
(5.7)
—
—
—
0.4
0.4
(13.9)
—
(1.8)
—
(15.7)
Total
£m
(18.8)
(33.4)
(12.5)
—
(64.7)
Electric Thermal Solutions restructuring costs credit of £2.3m is made up of a £1.7m release of restructuring costs booked in
the previous period and £0.6m in relation to the sale of a previously fully impaired asset.
2022
Amortisation
of acquisition-
related
intangible
assets
£m
Reversal of
acquisition-
related fair
value
adjustments
to inventory
£m
Disposal of
subsidiaries
in Russia
£m
Restructuring
costs
£m
Acquisition-
related items
£m
Accelerated
depreciation
and other
related costs
on one-off
property
redevelopments
£m
Steam Thermal Solutions
Electric Thermal Solutions
Watson-Marlow
Corporate
Total
(4.6)
(15.3)
(3.8)
—
(23.7)
—
(1.8)
—
—
(1.8)
(5.3)
—
(1.8)
—
(7.1)
—
(15.5)
—
—
(15.5)
—
—
—
(9.1)
(9.1)
—
—
—
(4.2)
(4.2)
Total
£m
(9.9)
(32.6)
(5.6)
(13.3)
(61.4)
246
Spirax Group Annual Report 2023
Financial Statements Tax on adjusting items
Analysis of charge in year
UK corporation tax:
Current tax on income for the year
Adjustments in respect of prior years
Foreign tax:
Current tax on income for the year
Adjustments in respect of prior years
Total current tax (credit)/charge
UK deferred tax:
Origination and reversal of timing differences
Adjustment in respect of prior years
Foreign deferred tax:
Origination and reversal of timing differences
Adjustment in respect of prior years
Total deferred tax (credit)/charge
Tax on profit on ordinary activities
Reconciliation of effective tax rate
Profit before tax and share of profit/(loss) of Associate
Expected tax at blended rate
Increased withholding tax on overseas dividends
Non-deductible expenditure
Over provided in prior years
Other reconciling items
Total tax in Consolidated Income Statement
2023
Adjusted
£m
2023
Adjustments
£m
2023
Total
£m
2022
Adjusted
£m
2022
Adjustments
£m
2022
Total
£m
9.4
(0.1)
9.3
81.4
(0.7)
80.7
90.0
(6.5)
(0.4)
(6.9)
(4.7)
0.4
(4.3)
(11.2)
78.8
—
—
—
(6.1)
—
(6.1)
(6.1)
(4.9)
1.1
(3.8)
(3.9)
(4.5)
(8.4)
(12.2)
(18.3)
2023
Adjusted
£m
2023
Adjustments
£m
309.2
80.5
7.6
0.2
(0.8)
(8.7)
78.8
(64.7)
(15.5)
—
0.6
(3.4)
—
(18.3)
9.4
(0.1)
9.3
75.3
(0.7)
74.6
83.9
(11.4)
0.7
(10.7)
(8.6)
(4.1)
(12.7)
(23.4)
60.5
2023
Total
£m
244.5
65.0
7.6
0.8
(4.2)
(8.7)
60.5
7.3
(0.7)
6.6
89.4
(1.3)
88.1
94.7
0.3
(0.7)
(0.4)
(2.2)
0.4
(1.8)
(2.2)
92.5
(0.2)
—
(0.2)
(0.8)
—
(0.8)
(1.0)
(0.7)
—
(0.7)
(9.7)
2.0
(7.7)
(8.4)
(9.4)
2022
Adjusted
£m
2022
Adjustments
£m
370.6
93.0
6.2
0.6
(2.3)
(5.0)
92.5
(62.5)
(14.3)
—
3.0
2.0
(0.1)
(9.4)
7.1
(0.7)
6.4
88.6
(1.3)
87.3
93.7
(0.4)
(0.7)
(1.1)
(11.9)
2.4
(9.5)
(10.6)
83.1
2022
Total
£m
308.1
78.7
6.2
3.6
(0.3)
(5.1)
83.1
Effective tax rate
25.5%
28.3%
24.7%
25.0%
15.0%
27.0%
Spirax Group Annual Report 2023
247
Financial Statements Company Financial
Statements
In this section
249 Company Statement of Financial Position
250 Company Statement of Changes to Equity
251 Notes to the Company Financial Statements
248
Spirax Group Annual Report 2023
Financial Statements Company Statement of Financial Position
at 31st December 2023
Assets
Non-current assets
Property, plant and equipment
Loans to subsidiaries
Investment in subsidiaries
Investment in Associate
Deferred tax assets
Post-retirement benefits
Current assets
Loans to subsidiaries
Due from subsidiaries*
Other current assets
Cash and cash equivalents*
Total assets
Equity and liabilities
Current liabilities
Trade and other payables
Due to subsidiaries*
Current portion of long-term borrowings*
Short-term borrowings*
Net current (liabilities)/assets
Non-current liabilities
Long-term borrowings*
Deferred tax liabilities
Due to subsidiaries*
Total liabilities
Net assets
Equity
Share capital
Share premium account
Other reserves
Retained earnings
Total equity
Total equity and liabilities
Notes
2023
£m
2022
£m
11
3,9
2
2
6
7
3,9
9
4
5
9
10
10
6
9
8
8
20.7
104.0
758.8
3.0
8.2
5.5
5.9
106.2
756.6
—
10.5
3.9
900.2
883.1
0.4
68.5
7.8
39.2
200.2
67.7
3.8
31.4
115.9
303.1
1,016.1
1,186.2
5.8
90.4
0.3
81.8
178.3
(62.4)
10.6
98.7
200.1
39.3
348.7
(45.6)
112.5
141.2
0.2
7.0
119.7
298.0
718.1
19.8
90.1
14.7
593.5
718.1
1.4
3.2
145.8
494.5
691.7
19.8
88.1
2.0
581.8
691.7
1,016.1
1,186.2
* The prior period comparatives have been adjusted to reflect a reclassification to meet the presentational requirements of FRS101, with further detail given
within Note 1. This had no impact on the net assets of the Company.
The loss before dividends received was £28.4m (2022: £30.6m). Dividends from subsidiary undertakings of £169.1m (2022:
£72.4m) are excluded from this amount. Total profit recognised during the year was £140.7m (2022: £41.8m).
These Financial Statements of Spirax-Sarco Engineering plc, company number 00596337, were approved by the Board of
Directors and authorised for issue on 6th March 2024 and signed on its behalf by:
N.B. Patel
Director
Spirax Group Annual Report 2023
249
Financial Statements Company Statement of Changes in Equity
for the year ended 31st December 2023
Balance at 1st January 2023
Profit for the year
Other comprehensive income:
Cash flow hedges net of tax*
Remeasurement gain on post-retirement benefits
Deferred tax on remeasurement gain on post-retirement benefits
Total other comprehensive income for the year
Total comprehensive income for the year
Contributions by and distributions to owners of the Company:
Dividends paid
Equity settled share plans net of tax
Issue of share capital
Employee Benefit Trust shares
Investment in subsidiaries in relation to share options granted
Balance at 31st December 2023
Share
capital
£m
19.8
Share
premium
account
£m
88.1
—
—
—
—
—
—
—
—
—
—
—
19.8
—
—
—
—
—
—
—
—
2.0
—
—
90.1
Other
reserves
£m
2.0
—
5.0
—
—
5.0
5.0
—
—
—
5.5
2.2
14.7
Retained
earnings
£m
581.8
140.7
(0.9)
1.6
(0.4)
0.3
Total
equity
£m
691.7
140.7
4.1
1.6
(0.4)
5.3
141.0
146.0
(114.5)
(114.5)
(14.8)
(14.8)
—
—
—
2.0
5.5
2.2
593.5
718.1
* During the year, there has been a reclassification in relation to prior year deferred tax on cash flow hedges of £0.9m
For the year ended 31st December 2022
Balance at 1st January 2022
Profit for the year
Other comprehensive income:
Cash flow hedges net of tax
Remeasurement loss on post-retirement benefits
Deferred tax on remeasurement loss on post-retirement benefits
Total other comprehensive income for the year
Total comprehensive income for the year
Contributions by and distributions to owners of the Company:
Dividends paid
Equity settled share plans net of tax
Issue of share capital
Employee Benefit Trust shares
Investment in subsidiaries in relation to share options granted
Share
capital
£m
19.8
—
—
—
—
—
—
—
—
—
—
—
Share
premium
account
£m
86.3
—
—
—
—
—
—
—
—
1.8
—
—
Balance at 31st December 2022
19.8
88.1
Other
reserves
£m
4.5
—
(3.5)
—
—
(3.5)
(3.5)
—
—
—
(2.2)
3.2
2.0
Retained
earnings
£m
657.4
41.8
—
(1.3)
0.3
(1.0)
40.8
(103.1)
(13.3)
—
—
—
Total
equity
£m
768.0
41.8
(3.5)
(1.3)
0.3
(4.5)
37.3
(103.1)
(13.3)
1.8
(2.2)
3.2
581.8
691.7
Other reserves represent the Company’s share-based payments, capital redemption and Employee Benefit Trust reserves
(see Note 8).
The Notes on pages 251 to 256 form an integral part of the Financial Statements.
250
Spirax Group Annual Report 2023
Financial Statements Notes to the Company Financial Statements
1 Accounting policies
The separate Financial Statements of the Company are presented as required by the Companies Act 2006. The Company
meets the definition of a qualifying entity under FRS 100. Accordingly the Company has adopted FRS 101 Reduced
Disclosure Framework. As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available
under that standard in relation to share-based payments, financial instruments and the presentation of a Cash Flow
Statement. Where relevant, equivalent disclosures have been given in the Consolidated Financial Statements.
Under Section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own Income
Statement. As permitted by the audit fee disclosure regulations, disclosure of non-audit fees information is not included in
respect of the Company.
The Company’s accounting policies are the same as those set out in Note 1 of the Consolidated Financial Statements,
except as noted below.
The Directors have concluded that no critical judgements or key sources of estimation uncertainty have been made in the
process of applying the Company’s accounting policies.
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
Loans to or from other Group undertakings and all other payables and receivables are initially recorded at fair value, which is
generally the proceeds received. They are then subsequently carried at amortised cost.
Reclassification of prior period balances
The Company participates in a number of Group cash pooling arrangements. Historically the sterling zero balance account
pool, for which the Company holds the header account, has been incorrectly disclosed net within cash and cash equivalents
and short-term borrowings in the Statement of Financial Position. The correct classification under FRS101 is to present the
header account within cash and cash equivalents or short-term borrowings, with the accounts relating to subsidiaries being
shown within amounts due to or from subsidiaries. As a result, for presentational purposes, amounts have been reclassified
in the comparative year with the impact being an increase to cash & cash equivalents of £10.9m, a decrease in short-term
borrowings of £10.5m, an increase in amounts due from subsidiaries of £50.3m and an increase in amounts due to
subsidiaries of £71.7m.
Furthermore, a reclassification of £98.7m from non-current liabilities to current liabilities has been made to reflect that cash
pool related liabilities are due within 12 months. The prior year Revolving Credit Facility (RCF) balance of £35.0m has also
been reclassified from the current portion of long-term borrowings to the non-current portion of long-term borrowings.
These changes had no impact on the net assets of the Company.
2 Investments in subsidiaries and associates
2a Investment in subsidiaries
Cost:
At 1st January
Share options issued to subsidiary company employees
Disposals
Additions
At 31st December
2023
£m
2022
£m
756.6
748.8
2.2
—
—
3.2
(0.2)
4.8
758.8
756.6
Investments are stated at cost less provisions for any impairment in value.
Details relating to subsidiary undertakings are given on pages 258 to 263. Except where stated, all classes of shares were
100% owned by the Group at 31st December 2023. The country of incorporation of the principal Group companies is the
same as the country of operation with the exception of companies operating in the United Kingdom which are incorporated
in Great Britain. All operate in steam, electrical thermal energy solutions, fluid path technologies or peristaltic pumping
markets except those companies identified as a holding company on pages 258 to 263.
2b Investment in associates
On 4th July 2023 the Company invested in 15.0% of Kyoto Group AS (Kyoto) for total consideration of 41.1m NOK (£3.0m). On
the same date the Company disposed of its 14.7% investment in Econotherm (UK) Ltd for consideration of £0.4m.
Spirax Group Annual Report 2023
251
Financial Statements Notes to the Company Financial Statements continued
3 Loans to subsidiaries
Cost:
At 1st January
Advances
Interest
Repayments
Exchange adjustment
At 31st December
The terms and conditions of loans to subsidiaries at 31st December 2023 were as follows:
Currency
Nominal
interest rate
Year of
maturity
€
€
1.10%
2.36%
2023
2026
2023
£m
2022
£m
306.4
291.0
—
3.9
(200.3)
(5.6)
—
4.7
(4.7)
15.4
104.4
306.4
2023
£m
—
104.4
104.4
0.4
104.0
2023
£m
7.8
7.8
2023
£m
5.8
5.8
2022
£m
199.8
106.6
306.4
200.2
106.2
2022
£m
3.8
3.8
2022
£m
10.6
10.6
1st January
2023
£m
Recognised
in income
£m
Recognised
in OCI
£m
Recognised
in equity
£m
31st December
2023
£m
10.5
(1.4)
9.1
0.2
0.5
0.7
(1.4)
(0.4)
(1.8)
—
—
—
9.3
(1.3)
8.0
1st January
2022
£m
Recognised
in income
£m
Recognised
in OCI
£m
Recognised
in equity
£m
31st December
2022
£m
0.1
(1.3)
(1.2)
9.5
0.3
9.8
0.9
(0.4)
0.5
—
—
—
10.5
(1.4)
9.1
Spirax-Sarco Overseas Limited
Spirax-Sarco Overseas Limited
Total loans to subsidiaries
Due within one year
Due after more than one year
4 Other current assets
Prepayments and accrued income
Total other current assets
5 Trade and other payables
Accruals
Total trade and other payables
Trade and other payables are due within one year.
6 Deferred tax assets and liabilities
Movement in deferred tax during the year 2023
Other temporary differences
Pensions liability
Company total
Movement in deferred tax during the year 2022
Other temporary differences asset
Pensions liability
Company total
252
Spirax Group Annual Report 2023
Financial Statements 7 Employee benefits
Pension plans
The Company is accounting for pension costs in accordance with International Accounting Standard 19.
The disclosures shown here are in respect of the Company’s defined benefit obligations. Other plans operated by the
Company were defined contribution plans.
The total expense relating to the Company’s defined contribution pension plans in the current year was £1.2m (2022:
£0.9m).
At 31st December 2023 the post-retirement mortality assumptions in respect of the Company defined benefit scheme
follows 84%/87% (male/female) of SAPS S3 light,CMI 2021 future improvements, 1.25% long term trend, smoothing factor of
7, 0.25% initial addition and a w parameter of 10%. At 31st December 2022 the post-retirement mortality assumptions in
respect of the Company defined benefit scheme follows 84%/87% (male/female) of SAPS S3 light, CMI 2021 projections with
a long-term trend of 1.25% pa, and an initial additional parameter of 0.25% and w2020 parameter of 10%. These assumptions
are regularly reviewed in light of scheme-specific experience and more widely available statistics.
The financial assumptions used at 31st December were:
Rate of increase in pensions
Rate of price inflation
Discount rate
Weighted average
assumptions used to define
the benefit obligations
2023
%
2.9%
3.0%
4.5%
2022
%
2.9
3.2
4.7
The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions, which
due to the timescale covered, may not necessarily be borne out in practice.
Fair value of scheme assets:
Equities
Bonds
Other
Total market value in aggregate
£27.6m (2022: £32.5m) of scheme assets have a quoted market price in an active market.
The actual return on plan assets was a gain of £3.2m (2022: a loss of £15.0m).
The amounts recognised in the Company Statement of Financial Position are determined as follows:
Fair value of scheme’s assets
Present value of funded scheme’s liabilities
Retirement benefit asset recognised in the Statement of Financial Position
Related deferred tax
Net pension asset
2023
£m
6.3
17.1
19.3
42.7
2022
£m
5.2
22.7
14.6
42.5
2023
£m
42.7
2022
£m
42.5
(37.2)
(38.6)
5.5
(1.3)
4.2
3.9
(1.4)
2.5
The movements in the defined benefit obligation (DBO) recognised in the Statement of Financial Position during the year were:
Defined benefit obligation at beginning of year
Interest cost
Remeasurement gain/(loss)
Actual benefit payments
Defined benefit obligation at end of year
2023
£m
(38.6)
(1.7)
0.3
2.8
2022
£m
(55.2)
(1.0)
14.9
2.7
(37.2)
(38.6)
Spirax Group Annual Report 2023
253
Financial Statements Notes to the Company Financial Statements continued
7 Employee benefits continued
Pension plans continued
The movements in the fair value of plan assets during the year were:
Value of assets at beginning of year
Expected return on assets
Remeasurement gain/(loss)
Administration costs
Actual benefit payments
Value of assets at end of year
The estimated employer contributions to be made in 2024 are £nil.
The history of experience adjustments is as follows:
Defined benefit obligation at end of year
Fair value of scheme’s assets
Retirement benefit recognised in the Statement of Financial Position
Experience adjustment on scheme’s liabilities
As a percentage of scheme’s liabilities
Experience adjustment on scheme’s assets
As a percentage of scheme’s assets
2023
£m
(37.2)
42.7
5.5
0.1
0.3%
1.3
3.0%
2022
£m
(38.6)
42.5
3.9
0.9
2.3%
(16.1)
37.9%
2021
£m
(55.2)
60.3
5.1
3.5
6.3%
2.4
4.0%
The expense recognised in the Company Income Statement was as follows:
Current service and administration cost
Net interest on scheme’s assets and liabilities
Total expense recognised in Income Statement
Statement of Comprehensive Income (OCI):
Remeasurement effects recognised in OCI:
Due to experience on DBO
Due to demographic assumption changes in DBO
Due to financial assumption changes in DBO
Return on assets
Total remeasurement gain/(loss) recognised in OCI
Deferred tax on remeasurement amount recognised in OCI
Cumulative loss recognised in OCI at beginning of year
Cumulative loss recognised in OCI at end of year
2023
£m
42.5
1.9
1.3
(0.2)
(2.8)
42.7
2020
£m
(55.2)
60.8
5.6
(5.0)
9.1%
2.6
4.3%
2023
£m
(0.2)
0.2
—
2023
£m
(0.1)
1.0
(0.6)
1.3
1.6
(0.4)
(11.5)
(10.3)
2022
£m
60.3
1.1
(16.1)
(0.1)
(2.7)
42.5
2019
£m
(53.9)
59.5
5.6
—
0.0%
4.1
6.9%
2022
£m
(0.1)
0.1
—
2022
£m
(0.9)
0.5
15.3
(16.1)
(1.2)
0.3
(10.6)
(11.5)
Sensitivity analysis
The effect on the defined benefit obligation at 31st December 2023 of an increase or decrease in key assumptions is as follows:
Increase/(decrease) in pension defined benefit obligation
Discount rate assumption being 1.00% higher
Discount rate assumption being 1.00% lower
Inflation assumption being 1.00% higher
Inflation assumption being 1.00% lower
Mortality assumption life expectancy at age 65 being one year higher
£m
(2.8)
3.0
2.0
(1.9)
1.1
Share-based payments
Disclosures of the share-based payments offered to employees of the Company are set out below. The description and
operation of each scheme is the same as outlined in the Group disclosure.
254
Spirax Group Annual Report 2023
Financial Statements 7 Employee benefits continued
Performance Share Plan
The relevant disclosures in respect of the Performance Share Plan grants are set out below.
Grant date
Mid-market share price at grant date
Number of employees
Shares under scheme
Vesting period
Probability of vesting
Fair value
8 Called-up share capital and reserves
Ordinary shares of 26 12/13p (2022: 26 12/13p) each
Authorised 111,428,571 (2022: 111,428,571)
Allotted, called up and fully paid 73,776,048 (2022: 73,776,048)
2019
Grant
2020
Grant
2021
Grant
2022
Grant
2023
Grant
15th May 12th March
4th May 14th March 13th March
8,161.0p
7,775.0p
11,770.0p
11,910.0p 10,880.0p
12
60,626
3 years
74.1%
19
82,607
3 years
74.3%
15
45,815
3 years
73.9%
13
42,573
3 years
76.1%
15
52,259
3 years
81.2%
6,048.9p
5,779.2p
8,698.0p
9,057.6p
8,829.1p
2023
£m
30.0
19.8
2022
£m
30.0
19.8
35,794 shares with a nominal value of £9,637 were issued in connection with the Group’s Employee Share Schemes for a
consideration of £2.0m received by the Company. In 2023 the Parent Company purchased 114,000 shares representing
0.15% of called-up share capital with a nominal value of £30,692 for a consideration of £12,749,424. The shares were placed
in an Employee Benefit Trust (EBT) to be used in connection with the Group’s Employee Share Scheme. At 31st December
2023 139,907 shares were held in an Employee Benefit Trust and available for use in connection with the Group’s Employee
Share Schemes. 15 senior employees of the Company have been granted options on ordinary shares under the Share Option
Scheme and Performance Share Plan (details in Note 7).
Other reserves in the Company Statement of Changes in Equity on page 250 are made up as follows:
Share-based payments reserve
Cash flow hedges reserve
Capital redemption reserve
Employee Benefit Trust reserve
Total other reserves
1st January
2023
£m
Change
in year
£m
31st December
2023
£m
25.4
(3.7)
1.8
(21.5)
2.0
2.2
5.0
—
5.5
12.7
27.6
1.3
1.8
(16.0)
14.7
Share-based payments reserve
This reserve records the Company’s share-based payment charge that is recognised in reserves.
Cash flow hedges reserve
This reserve records the Company’s cumulative net change in the fair value of forward exchange contracts where they are
designated as effective cash flow hedge relationships
Capital redemption reserve
This reserve records the historical repurchase of the Company’s own shares.
Spirax Group Annual Report 2023
255
Financial Statements Notes to the Company Financial Statements continued
8 Called-up share capital and reserves continued
Employee Benefit Trust reserve
The Company has an Employee Benefit Trust which is used to purchase, hold and issue shares in connection with the
Group’s Employee Share Schemes. The shares held in Trust are recorded in this separate reserve.
9 Related party transactions
Dividends received from subsidiaries
Current loans due from subsidiaries at 31st December
Non-current loans due from subsidiaries at 31st December
Current amounts due from subsidiaries at 31st December
Current amounts due to subsidiaries at 31st December
Non-current amounts due to subsidiaries at 31st December
10 Financial instruments
The terms and conditions of outstanding loans at 31st December 2023 are as follows:
2023
£m
169.1
0.4
104.0
68.5
90.4
7.0
Unsecured private placement – €120.0m
Revolving Credit Facility – Drawdown £10.0m
Total outstanding loans
Current portion of long-term borrowings due before 31st December 2024
Long-term borrowings payable after 31st December 2024
Total outstanding loans
Unsecured private placement – €225.0m
Unsecured private placement – €120.0m
Revolving Credit Facility – Drawdown £35.0m
Total outstanding loans
Current portion of long-term borrowings due before 31st December 2023*
Long-term borrowings payable after 31st December 2023*
Total outstanding loans
Currency
Nominal
interest rate
Year of
maturity
€
£
2.4%
5.9%
2026
2028
Currency
Nominal
interest rate
Year of
maturity
€
€
£
1.1%
2.4%
4.0%
2023
2026
2027
2022
£m
72.4
200.2
106.2
67.7
98.7
3.2
Carrying
value
£m
104.3
8.5
112.8
0.3
112.5
112.8
Carrying
value
£m
199.8
106.5
35.0
341.3
200.1
141.2
341.3
* The prior period comparatives have been adjusted to reflect a reclassification, please see Note 1 for further details.
11 Other information
Dividends
Dividends paid by the Company are disclosed in Note 10 of the Consolidated Financial Statements.
Property, plant and equipment
The Company holds freehold property with a cost of £23.6m (2022: £7.1m), accumulated depreciation of £2.9m (2022:
£1.2m) and a net book value of £20.7m (2022: £5.9m). Included within the net book value of £20.7m as at 31st December
2023 is an amount of £17.4m (2022: £3.9m) in relation to assets under construction for the Group Head Office building in
Cheltenham (UK).
Employees
The total number of employees of the Company at 31st December 2023 was 129 (2022: 117).
Directors’ remuneration
The remuneration of the Directors of the Company is shown in the Annual Report on Remuneration 2023 on pages 162
to 174.
Auditor’s remuneration
Auditor’s remuneration in respect of the Company’s annual audit has been disclosed on a consolidated basis in the
Company’s Consolidated Financial Statements as required by Section 494(4)(a) of the Companies Act 2006.
Contingent liabilities and capital commitments
The Company has no contingent liabilities. Capital commitments of £3.9m exist at 31st December 2023 in respect of the
completion of the Group Head Office building in Cheltenham (UK) (2022: £nil).
256
Spirax Group Annual Report 2023
Financial Statements Corporate Information
Corporate Information
Corporate Information
In this section
258 Our Global Operations
264 Officers and Advisers
Spirax Group Annual Report 2023
257
Corporate Information Our Global Operations
Steam Thermal Solutions (formerly Steam Specialties) – EMEA
Country/Territory
Company name
Belgium
Spirax Sarco NV
Registered office address
Industriepark 5, B-9052 Zwijnaarde, Belgium
Czech Republic
Spirax Sarco spol sro
Prazska 1455, 102 00 Praha, Hostivar, Czech Republic
Egypt
Spirax Sarco Egypt
19 Farid Street, Heliopolis, Cairo, Egypt
Spirax Sarco Energy Solutions LLC (H)
19 Farid Street, Heliopolis, Cairo, Egypt
Finland
France
Spirax Oy
Spirax Sarco SAS
Niittytie 25 A 24, 01300 Vantaa, Helsinki, Finland
Zone Industrielle des Bruyères 8 Avenue le Verrier, 78190 Trappes, France
Spirax-Sarco France HoldCo SAS (H)
23 Route de Château-Thierry, 02200 Noyant-et-Aconin, Soissons, France
Gestra France SAS
Zone Industrielle des Bruyères, 8 Avenue Le Verrier 78190 Trappes, France
Spirax Sarco North & West Africa SAS
Zone Industrielle des Bruyères, 8 Avenue Le Verrier, 78190 Trappes, France
Germany
Spirax Sarco GmbH Regelapparate
Reichenaustr. 210, 78467 Konstanz, Germany
Spirax-Sarco Germany Holdings GmbH (H) Reichenaustr. 210, 78467, Konstanz, Germany
Gestra AG
Muenchener Str. 77, 28215, Bremen, Germany
Gestra HoldCo GmbH (H)
Muenchener Str. 77, 28215, Bremen, Germany
Spirax-Sarco Kft
Spirax Sarco Srl
Italgestra Srl
1103 Budapest Koér utca 2/A, Hungary
Via Per Cinisello 18, 20834 Nova Milanese, Italy
Via Per Cinisello 18, 20834 Nova Milanese, Italy
Spirax Sarco East Africa Limited
Clifton Park, Mombasa Road, Nairobi, Kenya
Spirax Sarco Maghreb
Secteur 3, Lot 146, Rue Arfoud, Bureaux 5 et 6, commerce 2-12000 Temara,
Morocco
Hungary
Italy
Kenya
Morocco
Netherlands
Spirax-Sarco Netherlands BV
Industrieweg 130A, 3044 AT, Rotterdam, Netherlands
Spirax-Sarco Engineering BV (H)
Industrieweg 130A, 3044 AT, Rotterdam, Netherlands
Spirax-Sarco Investments BV (H)
Industrieweg 130A, 3044 AT, Rotterdam, Netherlands
Spirax-Sarco Netherlands Holdings
Coöperative WA (H)
Sluisstraat 7, 7491 GA Delden, Delden, Netherlands
Norway
Poland
Spirax Sarco AS
Spirax Sarco Sp Zoo
Gestra Polonia Sp Zoo
Vestvollveien 14A, N-2019 Skedsmokorset, Norway
Jutrzenki 98, 02-230, Warszawa, Poland
ul Ku Ujściu 19, PL 80-172, Gdansk, Poland
Portugal
Spirax Sarco Equipamentos Ind Lda
Rua Quinta do Pinheiro, No 8 & 8A, 2794-058 Carnaxide, Portugal
Romania
Spirax-Sarco SRL
2-4 Traian Street, Cluj-Napoca Municipality, Cluj County, Romania
Gestra Portugal, Lda
Avenida Dr Antunes Guimaraes, Numero 1159, Porto 4100-082, Portugal
South Africa
Spirax Sarco Investments (Pty) Limited (H) Corner Brine Avenue and Horn Street, Chloorkop Ext 23, Gauteng 1624, South
Africa
Spirax Sarco South Africa (Pty) Limited
Corner Brine Avenue and Horn Street, Chloorkop Ext 23, Gauteng 1624, South
Africa
Spain
Spirax-Sarco SAU
C/ Sant Josep, 130 08980 Sant Feliu de Llobregat, Barcelona, Spain
Spirax-Sarco Engineering SLU (H)
C/ Sant Josep, 130 08980 Sant Feliu de Llobregat, Barcelona, Spain
Gestra Espanloa SA
Calle Luis Cabrera 86-88, 28002, Madrid, Spain
Sweden
Spirax Sarco AB
Switzerland
Spirax Sarco AG
Evenemansgatan 40, 169 56 Solna, Sweden
Gustav-Maurer-Strasse 9, 8702 Zollikon, Switzerland
Turkey
United Arab
Emirates
Spirax Sarco Valf Sanayi ve Ticaret A.S
Serifali Mevkii, Edep Sok No 27, 34775 Yukari Dudullu – Ümraniye, Istanbul, Turkey
Spirax Sarco Trading LLC
38-0, R338 Um Hurair Second, Dubai, United Arab Emirates
United Kingdom
Spirax-Sarco Limited*
Spirax-Sarco America Limited (H)
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER,
United Kingdom
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER,
United Kingdom
Spirax-Sarco America Investments
Limited* (H)
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER,
United Kingdom
Spirax-Sarco Investments Limited* (H)
Spirax-Sarco Overseas Limited* (H)
Gestra Holdings Limited* (H)
Gestra UK Limited
Cotopaxi Limited
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER,
United Kingdom
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER,
United Kingdom
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER,
United Kingdom
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER,
United Kingdom
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER,
United Kingdom
258
Spirax Group Annual Report 2023
Corporate Information Steam Thermal Solutions – Asia Pacific
Country/Territory
Company name
Registered office address
Australia
China
Spirax Sarco Pty Limited
14 Forge St., Blacktown, NSW 2148, Australia
Cotopaxi Energy Technology Development
(Beijing) Co. Ltd
Room 506, Unit 101 Floor 2-7, Building No. 1, 3 Chuangda Road, Chaoyang
District, Beijing, China 100102
Spirax-Sarco Engineering (China) Limited No 800 XinJun Ring Road, Pujiang Hi Tech Park, Shanghai, China
Spirax Sarco Trading (Shanghai) Co
Limited
No 800 XinJun Ring Road, Pujiang Hi Tech Park, Shanghai, China
Gestra (Shanghai) Fluid Control
Technology Co Limited
Room 333 3rd Floor of 4th Area Building 1, No.2001 North Yanggao Road
China (Shanghai) Free Trade Pilot Zone, Shanghai, China
Hong Kong
Spirax Sarco Hong Kong Co Limited
India
Spirax-Sarco India Private Limited
Indonesia
PT Spirax Sarco Indonesia
Unit 1507, 15th Floor, Prosperity Center, 25 Chin Yip Street, Kwun Tong,
Kowloon, Hong Kong
Plot No. 6, Central Avenue, Mahindra World City, Chengalpattu Taluk,
Kancheepuram District 603004, India
Kawasan Infinia Park Blok C-99, Jl. Dr Sahardjo No. 45, Manggarai Tebet,
Jakarta Selatan 12850, Indonesia
Japan
Malaysia
Spirax Sarco Godo Gaisha
261-0025, 2-37 Hamada, Mihama-ku, Chiba, Japan
Gestra Steam Solutions Sdn Bhd
18 Tidak Melebihi Baru Ditubuhkan, Malaysia
Spirax Sarco Sdn Bhd
No 10, Temasya 18, Jalan Pelukis U1/46A, 40150 Shah Alam, Selangor,
Malaysia
Spirax Sarco Investment Limited (H)
6th Floor, Akademi Etiqa, No23 Jalan Melaka, 50100 Kuala Lumpur, Malaysia
Myanmar
Spirax Sarco Limited
No.192, Kabar Aye Pagoda Road, Myanmar Centre – Tower 2, Unit.1218, Bahan
Township, Yangon, Myanmar
New Zealand
Spirax Sarco Limited
6 Nandina Avenue, East Tamaki, Auckland 2013, New Zealand
Philippines
Spirax-Sarco Philippines Inc
2308 Natividad Building, Chino Roces Avenue Extension, Makati City,
Philippines
Singapore
Spirax Sarco Pte Limited
21 Changi South Avenue 2, #01-01 Singapore 486630, Singapore
Spirax-Sarco APAC Investments Pte
Limited
21 Changi South Avenue 2, #01-01 Singapore 486630, Singapore
Gestra Singapore Pte Limited
21 Changi South Avenue 2, #01-01 Singapore 486630, Singapore
South Korea
Spirax Sarco Korea Limited
Steam People House, 99 Sadangro 30gil, Dongjak-gu, Seoul, Republic of Korea
Taiwan
Spirax Sarco Co Limited
Thailand
Spirax Sarco (Thailand) Limited
Vietnam
Spirax Sarco Vietnam Co Limited
6F-3, No. 12, Lane 270, Sec. 3, Pei Shen Road, Shen Keng District, New Taipei
City 22205, Taiwan
38 Krungthepkreeta Road, Khlong Song Ton Nun, Lat Krabang, Bangkok
10520, Thailand
4th Floor, 180 Nguyen Van Troi Street, Ward 8, Phu Nhuan District, Ho Chi
Minh City, Vietnam
Steam Thermal Solutions – Americas
Country/Territory
Company name
Registered office address
Argentina
Brazil
Canada
Chile
Colombia
Mexico
Spirax Sarco SA
Av. del Libertador 498, 12th Floor, Buenos Aires C1001ABR, Argentina
Spirax Sarco Ind e Com Limiteda
Hiter Controls Engenharia Limiteda
Avenida Manoel Lages do Chão, 268, Bairro Portão, Cotia, São Paulo,
06705-050, Brazil
Avenida Manoel Lages do Chão, 268, Bairro Portão, Cotia, São Paulo,
06705-050, Brazil
Spirax Sarco Canada Limited
383 Applewood Crescent, Concord, ON L4K 4J3, Canada
Spirax-Sarco Chile Limiteda
Las Garzas 930, Galpón E, Quilicura, Santiago de Chile, Chile
Inversiones Spirax-Sarco Chile Limiteda (H) Las Garzas 930, Galpón D, Quilicura, Santiago de Chile, Chile
Spirax Sarco Colombia SAS
Carretera Panamericana No 3-150, Jamundi, Valle del Cauca, Cali, Colombia
Spirax Sarco Mexicana, SAPI DE CV
Boulevard Alianza 30B, Parque Industrial CPA, Ciénega de Flores Nuevo León,
CP 65550, Mexico
Peru
Spirax Sarco Peru SAC
Av. Guillermo Dansey 2124, Lima, Lima, Perú
United States
Spirax Sarco Inc
1209 Orange Street, Wilmington, DE 19801, United States
Sarco International Corp (H)
1209 Orange Street, Wilmington, DE 19801, United States
Spirax Sarco Investments, Inc (H)
251 Little Falls Drive, Wilmington, DE 19808-1674, United States
Gestra USA, Inc
1209 Orange Street, Wilmington, DE 19801, United States
Spirax Group Annual Report 2023
259
Corporate Information Our Global Operations continued
Electric Thermal Solutions
Country/Territory
Company name
Registered office address
Australia
Belgium
Brazil
Canada
China
Vulcanic TEE Pty Limited
7 Buckman Cl, Toormina NSW 2452, Australia
Vulcanic SA
Uitbreidingstraat 60-62, 2600 Berchem, Belgium
Chromalox Engenharia Limiteda
Avenida Manoel Lages do Chão, 268, Bairro Portão, Cotia, São Paulo, 06705-050,
Brazil
Canadian Heat Acquisition Corp (H)
7051 68th Ave NW, Edmonton, Alberta, T6B 3E3, Canada
Chromalox Precision Heat Control
(Shanghai) Co Limited
88 Taigu Road, Suite A2, 4th Floor – Fenggu Building, Shanghai, 200131, China
Chromalox Precision Heat Control
(Suzhou) Co Limited
T02, No 1801, Pangjin Road, Pangjin Industrial Park, Wujiang, Suzhou, 215200,
China
Thermocoax (Chengdu) Co Limited
No.11 Fujiang Road, Shuangliu Park, Jiaelong Industry Port, Chengdu, Sichuan,
China
France
Constructions Electro-Thermiques
D’Alsace SAS
42 Rue des Aviateurs, 67500 Haguenau, France
Etirex SAS
Loreme SAS
RS Isolec SAS
23 Route de Château Thierry, Noyant-et-Aconin, Soissons, Cedex, F 02203, France
12 Rue des Potiers d’Etain, 57070 Metz, France
45 Avenue des Acacias, 45120 Cepoy, France
Thermocoax Developpement SAS
40 Boulevard Henri Sellier, 92150 Suresnes, France
Thermocoax SAS
Univers 32 SAS (H)
Usine de Planquivon, Athis-de-l’Orne, 61430 Athis-Val de Rouvre, France
41 Avenue de Friedland, 75008 Paris, France
Vulcanic Assets SAS (H)
48 Rue Louis Ampère, 93330 Neuilly-sur-Marne, France
Vulcanic Management 1 SAS (H)
48 Rue Louis Ampère, 93330 Neuilly-sur-Marne, France
Vulcanic Management 2 SAS (H)
48 Rue Louis Ampère, 93330 Neuilly-sur-Marne, France
Vulcanic Group Holding SAS (H)
48 Rue Louis Ampère, 93330 Neuilly-sur-Marne, France
Vulcanic SAS
48 Rue Louis Ampère, 93330 Neuilly-sur-Marne, France
Germany
Chromalox Isopad GmbH
Englerstraße 11, 69126 Heidelberg, Germany
Vulcanic GmbH
Donaustraße 21, 63452 Hanau, Germany
Vulcanic Triatherm GmbH
Flurstraße 9, 96515 Sonneberg, Germany
Hong Kong
Chromalox Hong Kong Holdings Limited (H) 33/F, Shui On Centre, Nos 6-8 Harbour Road, Wanchai, Hong Kong
India
Chromalox India Precision Heat & Control
Private Limited
1st Floor, 6 Unicom House, A-3 Commercial Complex, New Delhi, Janakpuri,
110058, India
Mexico
ELW Industrial S. de R. L. de C.V.
Chromalox Precision Heat and Control
(Singapore) Pte Limited
Carretera Nacional, K.M. 8.5, Modulo Industrial de America, Lote #5,
Nuevo Laredo, Tamaulipas, 88277, Mexico
No 11 Woodlands Close, #05-34, Singapore, 737854, Singapore
Vulcanic Termoelectrica SLU
Carretera de Viernoles no.32, 39300 Torrelavega, Cantabria, Spain
Chromalox (Asia Pacific) Limited
Chromalox Gulf DWC, LLC
383/2, The Village Business Centre, Unit D16-A, Moo 12, Sukhumvit Road,
Nongprue, Banglamung, Chon Buri, 20151, Thailand
PO Box 390012, Office No: E-2-0226, Business Park, Dubai Aviation City,
United Arab Emirates
United Kingdom
Chromalox (UK) Limited
AMP House, 2nd Floor, Dingwall Road, Croydon, Surrey CR0 2LX, United Kingdom
Thermocoax UK Limited
Tower House, Lucy Tower Street, Lincoln LN1 1XW, United Kingdom
Vulcanic UK Limited
Windward Barn, Honningham Thorpe Business Park Norwich Road, Colton,
Norwich NR9 5BZ, United Kingdom
United States
190 Detroit Street, LLC
2280 Hicks Rd., STE 500 Rolling Meadows, IL 60008, United States
305 Cary Point, LLC
325 Cary Point, LLC
Cary Detroit, LLC
Chromalox, Inc.
Durex HoldCo Corp (H)
Durex International, LLC
190 Detroit Street, Cary, IL 60013, United States
190 Detroit Street, Cary, IL 60013, United States
190 Detroit Street, Cary, IL 60013, United States
2711 Centerville Rd., Suite 400, Wilmington, DE 19808, United States
1209 Orange Street, Wilmington, DE 19801, United States
251 Little Falls Drive, Wilmington, DE 19808-1674, United States
Heat Acquisition Corp (H)
2711 Centerville Rd., Suite 400, Wilmington, DE 19808, United States
Thermocoax, Inc
Vulcanic EML, LLC
Vulcanic US, Inc (H)
1209 Orange Street, Wilmington, DE 19801, United States
5907 Breen Drive, Houston, TX 77086, United States
Capitol Services, Inc., 108 Lakeland Ave., Dover, DE 19901, United States
260
Spirax Group Annual Report 2023
Singapore
Spain
Thailand
United Arab
Emirates
Corporate Information Watson-Marlow Fluid Technology Solutions
Country/Territory
Company name
Registered office address
Australia
Austria
Belgium
Brazil
Canada
Chile
China
Watson-Marlow Pty Limited
Unit 15, 19-26 Durian Place, Wetherill Park, NSW 2164, Australia
Watson-Marlow Austria GmbH
Rathaus Viertel 3/1 OG/TOP 311, Guntramsdorf A 2353, Wien, Austria
Watson-Marlow NV
Industriepark 5, B-9052 Zwijnaarde, Belgium
Watson-Marlow Bredel Ind e Com de
Bombas Limiteda
Alameda Oceania, 63, Polo Empresarial Tamboré, Santana de Parnaiba, São
Paulo, CEP 06543-308, Brazil
Watson-Marlow Canada Inc
383 Applewood Crescent, Concord, ON L4K 4J3, Canada
Watson-Marlow Bombas Chile Limiteda
Las Garzas 930, Galpón E, Quilicura, Santiago de Chile, Chile
Shanghai Watson-Marlow Limited
No. 211, Wenjing Road, Shanghai Minhang District, China
Colombia
Watson-Marlow Colombia SAS
Carretera Panamericana No 3-150, Jamundi, Valle del Cauca, Cali, Colombia
Czech Republic
Watson-Marlow sro
Pražská 1455/18a, 102 00 Praha 10, Czech Republic
Denmark
Finland
France
Germany
Hungary
India
Ireland
Italy
Japan
Watson-Marlow Flexicon A/S
Frejasvej 2, 4100 Ringsted, Denmark
Watson-Marlow Finland Oy
Niittytie 25 A 24, 01300 Vantaa, Helsinki, Finland
Watson-Marlow SAS
Watson-Marlow GmbH
Watson-Marlow Kft
9 Route De Galluis, Zi Les Croix, 78940 La Queue Lez Yvelines, France
Kurt-Alder-Str. 1, 41569 Rommerskirchen, Germany
Lajos ucta 30, Budapest 1023, Hungary
Watson-Marlow India Private Limited
Mahalaxmi Icon, S. No. 132/2A-3A, Near Sai HP Petrol Pump, Pune-Mumbai
Bypass Road, Tathawade, Pune, Maharashtra, 411 033, India
Watson-Marlow Limited
Unit 1013, Gateway Business Park, New Mallow Rd., Cork, Ireland
Watson-Marlow Srl
Via Padana Superiore 74/D, 25080 Mazzano, Brescia, Italy
Watson-Marlow Co Limited
4-23-21 Ukima Kita-ku, Tokyo 115-0051, Japan
Malaysia
Watson-Marlow SDN BHD
Mexico
Watson-Marlow S de RL de CV
6th Floor, Akademi Etiqa No. 23 Jalan Melaka, 50100 Kuala Lumpur W.P.,
Malaysia
Boulevard Alianza 30B, Parque Industrial CPA, Ciénega de Flores Nuevo León,
CP 65550, Mexico
Netherlands
Watson-Marlow BV
Oslo 9 – 11, 2993LD Barendrecht, Netherlands
Watson-Marlow Bredel BV
Sluisstraat 7, 7491 GA, Delden, Netherlands
Watson-Marlow Bredel Holdings BV (H)
Sluisstraat 7, 7491 GA, Delden, Netherlands
Watson-Marlow Bredel Holdings II BV (H)
Sluisstraat 7, 7491 GA, Delden, Netherlands
New Zealand
Watson-Marlow Limited
Unit F, 6 Polaris Place, East Tamaki, Auckland 2013, New Zealand
Norway
Watson-Marlow Norge AS
Vestvollveien 14A, 2019 Skedsmokorset, Norway
Philippines
Watson-Marlow Inc
10th Floor EGI Rufino Plaza, Sen. Gil Puyat Avenue, Corner Taft Avenue,
Barangay, 38 Pasay City, Fourth District, Philippines
Poland
Singapore
Watson-Marlow Sp Zoo
Al. Jerzego Waszyngtona 146, 04-076 Warszawa, Poland
Watson-Marlow Pte Limited
421 Tagore Industrial Avenue, #01-13, Singapore 787805, Singapore
South Africa
Watson-Marlow Bredel SA (Pty) Limited
Unit 6 Cradleview Industrial Park, Cnr Beyers Naude Drive & Johan Street,
Laser Park, South Africa
Spain
Sweden
Watson-Marlow SLU
W-M Alitea AB
Tuset, 20 3 – 08006, Barcelona, Spain
Hammarby Fabriksväg 29-31, SE-120 30 Stockholm, Sweden
Switzerland
Watson-Marlow AG
Gustav-Maurer-Strasse 9, 8702 Zollikon
Taiwan
Watson-Marlow Co Limited
No.9 Lane 270 Sec. Beishen Road, Shenkeng District, New Taipei City 222,
Taiwan
United Arab
Emirates
Watson Marlow FZCO
Office Number FZJOA2005, Jafza One, Jebel Ali Free Zone, Dubai, United Arab
Emirates
United Kingdom
Aflex Hose Limited
Dyson Wood Way, Bradley, Huddersfield HD2 1GZ, United Kingdom
BioPure Technology Limited
Bickland Water Road, Falmouth, Cornwall TR11 4RU, United Kingdom
Watson-Marlow Limited*
Bickland Water Road, Falmouth, Cornwall TR11 4RU, United Kingdom
United States
ASEPCO
1161 Cadillac Ct, Milpitas, CA 95035, United States
Watson-Marlow America Manufacturing
Inc
37 Upton Drive, Wilmington, MA 01887, United States
Watson Marlow Inc
37 Upton Technology Park, Wilmington, MA 01887, United States
Watson-Marlow Flow Smart Inc
1675 South State St., Suite B, Dover, DE 19901, United States
Spirax Group Annual Report 2023
261
Corporate Information Our Global Operations continued
Dormant companies
Country/Territory
Company name
Registered office address
Canada
France
Russia
Canadian Heat Holding Corp
6600-100 King Street W., 1 First Canadian Place, Toronto, Ontario M5X 1B6, Canada
Heat Holding France SAS
23 Route de Château-Thierry, 02200 Noyant-et-Aconin, Soissons, France
Vulcanic (Representative Office)
Business Centre Grad, 1 Bld, 3A Solnechnaya Street, Moskovskoe Poselenie,
108811 Moscow, Russia
United Kingdom
Gervase Instruments Limited*
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER,
United Kingdom
Heat Holding (UK) Limited
Lansdowne Building, 2 Lansdowne Road, Croydon CR9 2ER, United Kingdom
SARCO Limited*
Sarco Thermostats Limited
Spirax Group Limited
Spirax Manufacturing Co Limited
Spirax-Sarco Europe Limited*
United States
Spirax-Sarco International Limited*
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER,
United Kingdom
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER,
United Kingdom
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER,
United Kingdom
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER,
United Kingdom
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER,
United Kingdom
Charlton House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER,
United Kingdom
Heat Acquisition Corp.
251 Little Falls Drive, Wilmington, DE 19808-1674, United States
Mexican Heat Holding Corp.
c/o RA PO Box 20380, Carson City, Nevada 89706, United States
Mexican Heat Holding, LLC
160 Greentree Dr., Suite 101, Dover, Delaware 19904, United States
Ogden Manufacturing Co.
2711 Centerville Rd., Suite 400, Wilmington, DE 19808, United States
The global operations listed on pages 258 to 262 are registered companies.
In addition to these operations, we have a number of other operating units, including an Associate company; a company that
is part owned with a third-party trust; branches of Spirax Sarco steam or Watson-Marlow companies; and several Watson-
Marlow businesses that operate via Spirax Sarco steam business companies. The Spirax Group Education Fund, established
in 2021, is not included in the consolidated financial statements as under IFRS 10 the Group does not have control of this
fund.
Details of these operations can be found on page 263.
Key
*
Direct subsidiary owned by Spirax-Sarco Engineering plc.
(H) Holding company.
262
Spirax Group Annual Report 2023
Corporate Information 3. UK registered subsidiaries exempt from audit:
Company name
Company number
BioPure Technology Limited
03665190
Chromalox (UK) Limited
04325451
Cotopaxi Limited
07038605
Gestra UK Limited
10639879
Spirax-Sarco America Limited
07829847
Spirax-Sarco Investments Limited
00100995
Spirax-Sarco Overseas Limited
01472201
11612492
Gestra Holdings Limited
Spirax-Sarco America Investments Limited 11639451
04325456
Heat Holding (UK) Limited
01088141
Aflex Hose Limited
03504380
Thermocoax U.K. Limited
07194498
Vulcanic UK Limited
The companies listed above qualify to take the statutory audit exemption
as set out within Section 479A of the Companies Act 2006 for the period
ended 31st December 2023. Spirax-Sarco Engineering plc will guarantee
the debts and liabilities of the companies claiming the statutory audit
exemption at the balance sheet date in accordance with Section 479C of
the Companies Act 2006.
Notes
1. All subsidiaries in the tables on pages 258 to 262 are indirect subsidiaries
of Spirax-Sarco Engineering plc, unless indicated*. All subsidiaries listed
are ultimately 100% owned by the Group, except as follows:
Company
Spirax Sarco Egypt
Spirax Sarco Energy Solutions LLC,
Egypt
Spirax Sarco Korea Ltd
Spirax-Sarco Philippines Inc
Spirax Sarco Services
Spirax Sarco (Thailand) Ltd
% owned by the Group
98.867%
98.992%
97.5%
99.998%
48.51%. (51.49% is owned
by a third-party trust, The
Tomorrow Trust). The
Group has control of the
company and exposure, or
rights, to variable returns
from its investment in the
investee.
99.995%
2. In addition to the subsidiaries in the tables on pages 258 to 262,
we have the following operations:
Steam Technology Solutions:
Country
Cambodia
Denmark
Ghana
Greece
Ireland
Japan
Pakistan
Saudi Arabia
Slovakia
Sri Lanka
Tanzania
Uganda
Zambia
Operating as a branch of
Spirax Sarco Pte Limited, Singapore
Spirax-Sarco Limited, UK
Spirax-Sarco Limited, UK
Spirax-Sarco Limited, UK
Spirax-Sarco Limited, UK
Spirax-Sarco Limited, UK
Spirax-Sarco Limited, UK
Spirax-Sarco Limited, UK
Spirax Sarco Spol. s.r.o.
Spirax-Sarco India Private Limited, India
Spirax-Sarco Limited, UK
Spirax-Sarco Limited, UK
Spirax Sarco South Africa (Pty) Limited,
South Africa
Watson-Marlow Fluid Technology Solutions:
Country
Serbia
Argentina
China
Indonesia
South Korea
Thailand
Vietnam
Operating as a branch of
Watson-Marlow Austria GmbH
Operating via
Spirax Sarco SA, Argentina
Spirax-Sarco Engineering (China) Limited
PT Spirax-Sarco Indonesia
Spirax Sarco Korea Limited
Spirax Sarco (Thailand) Limited
Spirax Sarco Vietnam Co Limited
This complete list of our global operations, including subsidiaries,
forms part of the audited Financial Statements. For more information
see Note 2 in the Company Financial Statements.
Spirax Group Annual Report 2023
263
Corporate Information Officers and Advisers
Secretary and registered office
A.J. Robson
Group General Counsel and Company Secretary
Spirax-Sarco Engineering plc
Charlton House
Cirencester Road
Cheltenham
Gloucestershire GL53 8ER
Tel:
+44 (0)1242 535000
Email: group.legal@spiraxgroup.com
Web: spiraxgroup.com
Auditor
Deloitte LLP
Financial advisers
Rothschild
JPMorgan Securities plc (JPMorgan Cazenove)
Financial PR
Teneo
Bankers
Barclays Bank PLC HSBC Bank PLC
BNP Paribas Citibank, N.A.
Crédit Industriel et Commercial ING Bank, N.V.
UniCredit Bank AG Wells Fargo Bank, N.A.
Corporate brokers
JPMorgan Securities plc (JPMorgan Cazenove)
Morgan Stanley & Co. International plc
Registrars
The Company’s Registrar is Equiniti Limited.
Equiniti provide a range of services to shareholders.
Extensive information including many answers to frequently
asked questions can be found online.
Use the QR code to register for free at www.shareview.co.uk
Equiniti’s registered address is:
Aspect House, Spencer Road, Lancing, West Sussex,
BN99 6DA.
Solicitors
Baker & McKenzie LLP
Important dates
Annual General Meeting
2024 Half Year Results
15th May 2024
8th August 2024
Final dividend**
Ordinary shares quoted ex-dividend 25th April 2024
Record date for final dividend
26th April 2024
Final dividend payable
24th May 2024
** Subject to shareholder approval at the AGM
264
Spirax Group Annual Report 2023
Corporate Information Spirax Group’s commitment to environmental stewardship is
reflected in this Annual Report, which has been printed on Revive
100 Silk, which is 100% post-consumer recycled, FSC® certified
and totally chlorine free (TCF) paper. Printed in the UK by Park
Communications using vegetable-based inks, with 99% of dry
waste being diverted from landfill. The printer is a CarbonNeutral®
company. Both the mill and the printer are certified to ISO 14001
(Environmental Management System) and ISO 9001 (Quality
Management System).
Spirax Group
Charlton House
Cirencester Road
Cheltenham
Gloucestershire
GL53 8ER
spiraxgroup.com