Spectris stripping out complexity

The instrumentation and controls specialist had encountered difficulties in the early implementation of its ‘Project Uplift’ efficiency programme, but it’s now on track to deliver £3m in net annual benefits through 2018. It’s a business of many moving parts, so the initial measures centred on rationalising procurement practices, consolidating common areas of expenditure and moving to new suppliers. All rather mundane stuff on the face of it, but the process, once advanced, not only strips out complexity – a “driver of costs” – but is essentially an “enabler of strategy”, according to group finance director Clive Watson. The group is now moving ahead with work on the detailed validation and design phase for the shared service centre programme, with further detail to be provided through the remainder of 2018.

The business may be getting in trim, but M&A remains a central component of the growth strategy. Intangible assets tipped the £1bn mark at the half-year, after the group completed two acquisitions during the period for £176m in aggregate. The group enhanced its capabilities in its materials analysis segment through a deal to acquire Concept Life Sciences, while the integration of Revolutionary Engineering not only complements existing test capabilities in the test and measurement business, but has also extended its reach into North America. Post period-end, Spectris also brought VI-grade Group, a Germany-based provider of vehicle simulation technologies to the automotive industry.

Despite the flurry of acquisitions, and the ongoing spend on the group's £100m share buyback programme, net debt falls below the level of cash profits, while adjusted operating cash flow of £48.3m was “in line with expectations”, albeit on a slightly disappointing conversion rate of 69 per cent.

Deutsche Bank forecasts adjusted pre-tax profits of £233m for the 2018 year-end, leading to EPS of 161p, up from £218m and 145p in 2017.