Spectris pleased with first quarter sales growth

Spectris reported a 5% improvement in group like-for-like sales in its first quarter on Thursday.

The FTSE 250 precision measurement technology company said disposals reduced sales by 6%, however, which when combined with a 3% negative foreign currency exchange movement, resulted in a 4% decrease in reported sales to £289.4m.

In the three months ended 31 March, it said orders grew 5% on a like-for-like basis, or by 10% excluding its Brüel & Kjær Vibro and Millbrook operations.

Like-for-like sales increased “notably” in Asia, the board said, driven by a “very strong” performance in China, although against an easier comparator given the early impact of Covid-19 there in 2020.

In Europe and North America, like-for-like sales were 1% and 2% lower, respectively, with energy and utilities and automotive being the weaker markets there.

From an end market perspective, Spectris said like-for-like sales were the strongest among pharmaceutical and machine manufacturing customers, continuing the positive momentum reported in the latter part of 2020.

Like-for-like sales were also higher to the electronics, semiconductors, telecoms and aerospace and defence markets.

Although sales were lower to automotive, energy and utilities and to academic research customers, the company said the backdrop had been improving, and all of the end markets saw growth in Asia.

The firm said it continued to be highly cash generative, reporting net cash at the end of March of £334.8m, up from £106.1m on 31 December following receipt of £212.7m in cash from the divestments of Brüel & Kjær Vibro and Millbrook, and reflecting the ongoing spend on the

£200m share buyback programme.

As at 21 April, the group said it had bought back 816,014 shares for a total cost of £27.3m.

Spectris said it had agreed with private equity group SCF Partners for it to acquire ESG Solutions via an existing company in its portfolio, Deep Imaging Technologies, for a headline value of CAD 4m (£2.3m).

Given its end market exposure and smaller scale, Spectris said it had decided to divest ESG, with the transaction set to be the fourth in its portfolio simplification programme.

As it said in its full-year results, Spectris had acquired a minority holding in a US-listed entity in support of a potential acquisition opportunity.

The board said the merger had now completed, and in April it received $52.65m (£38.15m) in cash in exchange for the holding, which originally cost $19.8m.

Activities to establish the Spectris Foundation using part of that gain were said to be “well underway”.

In relation to the acquisition of Concurrent Real-Time, the group said it was still on track for the transaction to complete in the second quarter.

“We have started the year strongly,” said chief executive officer Andrew Heath.

“At the time of our full-year results, we stated that the order intake in the last quarter of 2020 provided good momentum coming into 2021 and that has been borne out.

“The order book has been further strengthened through the first quarter.”

Heath said he was “very pleased” with the group's performance, which was ahead of its expectations at the year-end.

“The growth in sales reflects the execution of our strategic growth initiatives and the recovery in many of our end markets.

“The recovery has been faster than expected, especially in pharmaceutical and semiconductor, supported by our sustained investment in research and development, and the programme of recent new product launches across our businesses.

“Our order book provides confidence that this positive momentum should continue and with our improved cost base, this creates a strong operating leverage opportunity.”

The company was “confident” that it was well-positioned for continued market recovery in 2021, Andrew Heath added.

“While the first quarter has seen economies recovering, albeit at varying speeds, we are again seeing Covid-19 cases rising and lockdowns still prevalent in a number of the countries in which we operate.

“We continue to ensure we support both our employees and our customers, whilst progressing our strategic initiatives to take advantage of the recovery.”

At 0847 BST, shares in Spectris were down 1% at 3,266p.