Although we noted encouraging signs in several of its geographical divisions at its June half year, we still thought Spectris (SXS) needed to demonstrate progress on underlying margins. A 110-basis point uplift in the underlying operating margin provides confirmation on that score, and fed through to an 8 per cent rise in adjusted profits to £224m on a like-for-like basis. In 2017, the group recorded underlying sales growth in each of its four segments and key regions, together with an improved showing from Omega Engineering, reflected in strengthening sales and higher gross margins in the industrial controls business unit.
Trading aside, the instrumentation and controls specialist has encountered difficulties in the first phase of its ‘Project Uplift’ efficiency programme. Though management is confident of delivering supply-chain savings in areas like procurement and freight contracts, there have been issues with the convergence of the group’s IT systems. Consequently, the group has lowered its expected annualised savings for the project's first phase from £35m to £25m, albeit at a reduced one-off cost.
In addition to four bolt-on acquisitions through the year, Spectris garnered around £120m from the disposal of Microscan Systems in October. The proceeds have been used to pay down debt and will fund an imminent £100m share buyback.
Prior to these figures, Stifel was forecasting adjusted EPS of 152p for the 2018 year-end, against 132p in 2017.
| SPECTRIS (SXS) | ||||
| ORD PRICE: | 2,729p | MARKET VALUE: | £ 3.26bn | |
| TOUCH: | 2,725-2,730p | 12-MONTH HIGH: | 2,869p | LOW: 2,225p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 1,009p* | NET DEBT: | 4% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 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 |
| 2017 | 1.53 | 278 | 197 | 56.5 |
| % change | +13 | +773 | +2191 | +9 |
| Ex-div: | 24 May | |||
| Payment: | 29 Jun | |||
| *Includes intangible assets of £837m, or 702p a share. | ||||
