Spectris proposes £175m special dividend

Spectris has experienced limited top-line growth and expects this trend to continue amid a challenging industrial backdrop. This has been compounded by the coronavirus outbreak, and as a result the group says it is “experiencing less activity in China in February than would normally be expected”. But its self-help initiatives, which have involved revamping its product mix and staff cuts, have brought target-beating recurring cost benefits of £25.5m, and the group expects a further £10m this year. Restructuring costs of £52.2m did, however, surpass an anticipated £45m.

Following a weak first half from subsidiary CLS, new management was brought in and a review conducted, with the group exiting its environmental analytical laboratories business. A £35.1m goodwill impairment of the division was subsequently charged to the income statement.

After the special dividend, the group’s net debt will rise to 0.4 times annual cash profits. The decision to reward shareholders so generously surprised broker Stifel, which speculated that the industrial group "cannot currently find compelling acquisitions at sensible prices”. Spectris chief financial officer Derek Harding told analysts that the company has an active pipeline of acquisitions and that the group would be comfortable stretching the net debt to cash profits multiple to as high as two, for the right deal. 

JP Morgan Cazenove forecasts full-year 2020 adjusted pre-tax profits of £231m and earnings per share of 157p, respectively, rising to £245m and 166p in 2021.