Acquisitions and weaker sterling help Spectris through first half

Productivity-enhancing instrumentation and controls company Spectris posted its half-year results for the six months to 30 June on Thursday, with reported sales growth of 3% to £581.4m.

The FTSE 250 firm said acquisitions contributed 2% to that, with foreign currency exchange movements benefitting growth by 5% and like-for-like sales declining by 3%

It claimed to have a stable adjusted operating profit margin, reflecting “good overhead cost control”, and it now expects to generate annualised restructuring benefits of around £10m in 2016.

Three acquisitions were completed in the first half, with two additional ones completed in July - Spectris’ board said these were complementary to its strategy to provide a combination of hardware, software and services.

Adjusted operating profit grew 2.3% to £68.9m and adjusted profit before tax was up 2% to £66.5m, leading to a 2% rise in adjusted basic earnings per share to 43p.

It reported a “robust” adjusted operating cash conversion of 134%, and declared a dividend per share of 18p - a 4% increase.

“Trading conditions in the period continued to be challenging, particularly in our In-line Instrumentation and Industrial Controls segments, both of which were impacted by weak global industrial demand,” said Spectris chief executive John O'Higgins.

“We continue to make progress transitioning our customer offering from the supply of instruments towards the provision of solutions encompassing hardware, software and services, with the acquisitions of CAS Clean Air Service AG and Capstone Technology Corporation during the period, followed by DISCOM Elektronische Systeme und Komponenten GmbH which we have announced today, enhancing our software and service capabilities and enabling us to create greater value for our customers.”

O’Higgins said that, given the challenging environment, the company remains focussed on “self-help actions” to better align cost growth to sales growth, and has recently commenced a comprehensive group-wide productivity improvement programme to augment the measures previously announced.

“Taking into consideration the potential net currency benefits at current exchange rates, the increased macro uncertainty and our limited visibility on trading in the second half, the expected overall outcome for 2016 is unchanged.

“Our strategic progress, together with our broad end-market and geographic diversification, strong balance sheet and the benefits of our self-help actions, reinforce the board's view that Spectris is well positioned for the future,” O’Higgins explained.

Acquisition of DISCOM

In a separate announcement, posted after the interim results, Spectris announced that it has completed the acquisition of the German privately-held DISCOM Elektronische Systeme und Komponenten.

The up-front purchase consideration of €15.8m will be met from existing cash and bank facilities, the board said, and is subject to routine balance sheet adjustments.

In addition, contingent consideration may become payable to the sellers based on the achievement of certain milestones for a period of up to three years beginning 26 July.

“DISCOM is a leader in a niche high-growth, productivity-enhancing technology,” said Spectris business group director Eoghan O'Lionaird.

“Supported by Spectris' global reach and expertise we believe there is a significant opportunity for DISCOM to strengthen its market position, expand internationally and accelerate its growth.

“This acquisition is in line with Spectris' strategy to provide innovative customer solutions that use combinations of instrumentation, software and services to enhance productivity and create greater value for our customers,” O’Lionaird explained.