There were few common themes in London's electronics sector last year. Spectris (SXS) and Morgan Advanced Materials (MGAM) earned praise for their respective restructuring efforts, while Halma (HLMA) continued its acquisition spree. But it was Renishaw (RSW) that came out on top in terms of financial performance, combining new product launches with record figures.
One similarity was the various shares' premium price tags. But was this entirely justified? Morgan Advanced Materials, for example, fared relatively well in the first half of its financial year thanks to healthier end markets, but improving sales growth and investments in the business failed to prevent the stock's loss of momentum towards the end of the year. True, Morgan has struggled to achieve consistent growth as it busies itself with an internal restructuring, but some are still willing to bet on the company’s new direction. Indeed, with operating profits up a promising 24 per cent in the first half, management's self-help measures appear to be paying off for now.
Spectris, too, is seeking a new direction, and new(ish) chief executive Andrew Heath is in the middle of executing 'Project Uplift'. The company is focusing on higher-growth markets, and shelved plans for a shared service centre in favour of a "more comprehensive" cost reduction programme this year. But it will take time to implement the cost-cutting procedures that Spectris so desperately needs, so margins aren’t quite in recovery mode yet, leaving the stock trading at a narrow discount to its peers and own history.