22 November 2016 – Spectris plc (SXS: LSE), the productivity-enhancing instrumentation and controls company, issues a trading update covering the period from 1 July to 31 October 2016 (‘the period’).
Reported sales increased by 18% in the four months to end October. Acquisitions contributed 4% points of sales growth, foreign currency exchange movements positively impacted revenues by 18% points, whilst Group like-for-like1 (‘LFL’) sales declined by 4%. For the ten-month period 1 January to 31 October, LFL sales also declined by 4%.
Regionally, LFL sales grew in Asia Pacific and the Rest of the World, and declined in Europe and North America. The performance in Europe has improved moderately since the first half of the year while in contrast, North America saw a further deterioration. Materials Analysis delivered positive LFL sales growth in the period, whilst LFL sales declined in the other three segments. At Omega Engineering, the adverse P&L impact from inventory adjustments, referred to at the half-year results, has been quantified and ongoing process improvements continue to be implemented to remedy this.
Against this trading environment, the Group continues its self-help actions to better align costs to sales performance and is on track to deliver £10 million costs savings for the full year. We are making good progress in quantifying and planning the various productivity improvement initiatives included in Project Uplift, the group-wide efficiency programme announced at the half year. We will provide an update on the expected benefits, cost of implementation and timing at our 2016 final results announcement in February 2017.
During the period, we completed the acquisition of the entire share capital of Millbrook Group Limited (‘Millbrook’) for a purchase consideration of £122 million, on a debt and cash-free basis. Millbrook is one of Europe’s leading independent test, validation and engineering service providers primarily for the automotive sector and related markets such as tyres, petrochemical, defence and security. The integration is proceeding well and trading is in line with expectations.
We continue to make progress transitioning our customer offering towards the provision of solutions encompassing hardware, software and services. In this context, the acquisition of Millbrook is an important step, providing the opportunity to combine their service excellence with the equipment and software from other Spectris operating companies, in addition to the strong growth potential provided by its recent capital investments and a longer term intention to broaden its offering geographically.
Following the acquisition of Millbrook, at 31 October, net debt was £180 million. The Group continues to be highly cash generative and maintains a strong financial position.
In light of the challenging trading conditions, particularly in North America, and the continued weakness in the global oil and gas market, a review is underway of the balance sheet goodwill associated with ESG Solutions and Omega Engineering which is likely to lead to a non-cash impairment charge in the full-year accounts.
SUMMARY AND OUTLOOK
Commenting on trading, John O’Higgins, Chief Executive, said: “Trading conditions in the period have marginally deteriorated, particularly in North America, and our performance continues to be impacted by weak industrial demand. However, this is offset by further strategic progress on acquisitions and by the impact of foreign currency exchange movements. Accordingly, we expect the full year adjusted operating profit to be in line with current market expectations2.”
A conference call for analysts and investors will be hosted by John O’Higgins and Clive Watson, Group Finance Director, at 08.00 today to discuss this statement.
To access the call, please dial +44 20 3139 4830, toll free 0808 237 0030 – Pin code: 79113988#.
Or for replay, please dial +44 20 3426 2807, toll free 0808 237 0026 – Pin code: 678133#.
Spectris will publish its preliminary results for the year ending 31 December 2016 on 14 February 2017.
1 At constant exchange rates and excluding acquisitions
2 Company-compiled consensus forecast for 2016 full year adjusted operating profit: £192 million (range £179 million – £209 million)
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John O’Higgins, Chief Executive
+44 1784 470470
Clive Watson, Group Finance Director
+44 1784 470470
Siobhán Andrews, Head of Corporate Affairs
+44 1784 470470
Richard Mountain / Susanne Yule
+44 203 727 1374
Spectris plc is a leading supplier of productivity-enhancing instrumentation and controls. The Company’s products and technologies help customers to improve product quality and performance, improve core manufacturing processes, reduce downtime and wastage and reduce time to market. Its global customer base spans a diverse range of end user markets. Spectris operates across four business segments which reflect the applications and industries it serves: Materials Analysis, Test and Measurement, In-line Instrumentation and Industrial Controls. Headquartered in Egham, Surrey, United Kingdom, the Company employs approximately 8,800 people located in more than 30 countries. For more information, visit www.spectris.com.