The share price of Spectris (SXS) ticked up slightly on the release of full-year figures, which suggest action on the cost base is probably overdue. But while the underlying operating margin slipped 70 basis points to 14.9 per cent in the period, the instrumentation and controls specialist is addressing the matter.
Investors will need to take the long view in relation to the group's operational performance due to the launch of 'Project Uplift' productivity improvement programme. The company has identified potential annual savings of £35m achievable by 2019, but these will require short-term costs amounting to £45m.
The precipitous decline from the top line through to net earnings was largely attributable to increased marketing expenses and a non-cash charge of £115m relating to an impairment of goodwill and other intangible assets at controls business Omega Engineering, acquired in 2011, and measurement specialist ESG Solutions, acquired in 2014.
The transition to a customer-focused strategy has been given impetus by the acquisition of Millbrook, an automotive test services platform, while the merger of two of Spectris' larger operating companies, Malvern Instruments and PANalytical, will allow cross-selling.
Prior to these figures, analysts at Peel Hunt were forecasting adjusted profits and EPS of £203m and 130p in 2017, rising to £218m and 140p in 2018.
| SPECTRIS (SXS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,508p | MARKET VALUE: | £2.99bn | |
| TOUCH: | 2,502-2,508p | 12-MONTH HIGH: | 2,527p | LOW: 1,498p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 292 | |
| NET ASSET VALUE: | 895p* | NET DEBT: | 14% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1.23 | 185 | 120 | 39.0 |
| 2013 | 1.20 | 272 | 169 | 42.8 |
| 2014 | 1.17 | 171 | 114 | 46.5 |
| 2015 | 1.19 | 142 | 95.6 | 49.5 |
| 2016 | 1.35 | 31.9 | 8.6 | 52.0 |
| % change | +13 | -77 | -91 | +5 |
Ex-div: 25 May Payment: 30 Jun *Includes intangible assets of £900m, 755p a share | ||||
