Stronger second-half trading was not enough to rescue Spectris's (SXS) full-year results after a dismal first half. The manufacturer of testing and control equipment for industries including mining, oil and gas, pharmaceuticals and transportation was buoyed by an improving US economy, but still had to contend with a weak performance from its materials analysis division and challenging conditions in Europe, Africa and Russia.
Tepid demand in metals, minerals and mining continued to hit the materials analysis business, operating profits from which fell 16 per cent to £53m. An adverse sales mix in the division also contributed to a 120 basis point slide in group operating margins to 14.3 per cent - as did significant investment in strategic growth initiatives.
After a long dry streak, Spectris splashed out £94m on six acquisitions. Management was particularly enthusiastic about its increased exposure to the life science sector. Chief executive John O'Higgins told us further acquisitions could follow. The group's debt-light balance sheet and ability to turn operating profit into cash - the conversion rate was 89 per cent last year - put it in a strong position both to look outside its business for growth and to continue upping research spending.
Broker JPMorgan Cazenove expects adjusted EPS of 135p for the year ahead, rising to 150p in 2016 (from 124p in 2014).
| SPECTRIS (SXS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,209p | MARKET VALUE: | £2.6bn | |
| TOUCH: | 2,209-2,217p | 12-MONTH HIGH: | 2,493p | LOW: 1,606p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 770p* | NET DEBT: | 14% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 0.90 | 120 | 83 | 28.0 |
| 2011 | 1.11 | 166 | 109 | 33.6 |
| 2012 | 1.23 | 185 | 120 | 39.0 |
| 2013 | 1.20 | 272 | 169 | 42.8 |
| 2014 | 1.17 | 171 | 114 | 46.5 |
| % change | -2 | -37 | -33 | +9 |
Ex-div: 28 May Payment: 26 Jun *Includes intangible assets of £778m, or 654p a share | ||||
