REG - Spectris PLC - Spectris Group half year results 2024
30/07/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240730:nRSd2894Ya&default-theme=true
RNS Number : 2894Y Spectris PLC 30 July 2024
Spectris plc - 2024 half year results
30 July 2024 - Spectris plc (SXS: LSE), the expert in providing insight
through precision measurement, announces half year results for the six months
ended 30 June 2024.
Step change in strategic execution to drive long-term growth in the face of
softer end markets
· Acquisition of SciAps Incorporated (SciAps) and Micromeritics
Instrument Corporation (Micromeritics) strengthens our leadership in materials
characterisation for advanced materials analysis
· Our commitment to R&D and innovation is delivering a record level
of new products to drive organic growth and market share gains
· Returning cash to shareholders through continuation of £150 million
share buyback, with £100 million remaining
· As announced in June, our first half performance reflects a tough
comparator, softer conditions in some end markets and the rephasing of £22
million sales and £15 million operating profit into the second half relating
to our new ERP system
· Order book of £532 million at the end of the period provides good
visibility into the second half
· Excluding any incremental profit associated with the acquisition of
SciAps and Micromeritics, we expect to deliver adjusted operating profit for
the full year in line with current market expectations 1 (#_ftn1)
Andrew Heath, CEO, said:
"In 2019, we set out to evolve our portfolio to increase the quality, growth,
margin profile and resilience of the Group. The combination of our disposal
programme and the redeployment of capital to acquire and build a world-class
business, means we have truly reshaped the portfolio in the last five years,
providing a high-quality platform from which to drive sustainable growth well
into the future. This has structurally increased our ability to deliver
against our medium-term financial targets. And as I look ahead, I have never
been as excited about the future potential of the Group as I am today.
We have been very active across the Group over the last six months. We have
launched a record number of exciting products, completed our portfolio
rationalisation programme with the sale of Red Lion in April, and in July
announced the acquisition of two highly complementary businesses. I am
delighted with the addition of SciAps and Micromeritics and look forward to
them joining the Group. Both are high-quality, high-growth businesses, that
will further strengthen our customer offering.
As a result of our financial performance in the first half we will be taking
action to accelerate further self-help measures in the second half. With a
portfolio of great businesses, a clear strategy to deliver growth and expand
margins, we are well placed and in a strong position as we look ahead to 2025
and beyond."
Adjusted(1) Adjusted(1) LFL change(1) Statutory Statutory Statutory change
H1 2024 H1 2023 H1 2024 H1 2023
Sales (£m) 589.7 702.5 (10%) 589.7 702.5 (16%)
Operating profit (£m) 61.1 102.1 (35%) 24.0 70.5 (66%)
Operating margin (%) 10.4% 14.5% (400bps) 4.1% 10.0% (590bps)
Profit before tax (£m) 62.8 103.4 235.3 68.5 244%
Basic earnings per share (pence) 47.9p 77.2p 179.6p 50.0p 259%
Cash generated from operations 57.4 108.9 (47%)
Adjusted cash flow conversion (%) 111% 117%
Return on gross capital employed (%) 16.8% 16.7%
Dividend per share (pence) 26.6p 25.3p 5%
1. Alternative performance measures (APMs) are used consistently
throughout this press release and are referred to as 'adjusted' or
'like-for-like' (LFL). These are defined in full and reconciled to the
reported statutory measures in the Appendix to the Condensed Consolidated
Interim Financial Statements.
Chief Executive's Review
Summary
Over the last five years, we have simplified the Group and created a
faster-growing, more profitable business and transformed our offering through
the creation of two, world class divisions of scale in Spectris Scientific and
Spectris Dynamics. And in doing so we have deployed all aspects of our capital
allocation framework. Since 2018 we have sold nine businesses redeploying that
capital in 13 acquisitions; we have returned close to £1 billion through a
combination of share buybacks and our progressive dividend; and we are on a
journey to drive operational excellence across the Group through our
enterprise-wide ERP system and SBS. As a result, we have increased ROGCE
from 13.5% (FY 2019) to 18.5% (FY 2023) over the same period.
The strategic progress we have made, and the portfolio of world class
businesses that we have today, mean that I have never been more excited about
the opportunities for Spectris, and have even greater confidence in delivering
our medium-term objectives of 6-7% through cycle growth, with our self-help
initiatives supporting our progress towards margins of at least 20%+.
The sale of our Red Lion Controls business during the first half concluded the
portfolio transformation envisaged in 2019, with Spectris now focused on high
growth, high value premium precision measurement businesses. In 2024 we have
significantly strengthened the Spectris Scientific Division, creating a world
leader in advanced materials analysis, focused on high-growth end markets. It
is home to Malvern Panalytical, PMS and now the Servomex business. The two
strategically complementary acquisitions of high-quality, high-growth
businesses in SciAps and Micromeritics, announced shortly after the period
end, will significantly strengthen our leadership position and expand our
offering to customers, while delivering material synergies. This is entirely
consistent with our on-going portfolio strategy to build a higher-quality,
higher-growth, business.
This year is set to be a record year for innovation, supporting organic growth
and market share gains. Our commitment to innovation and solving our customers
most complex challenges, means we have launched a number of exciting, new
products, across both divisions, already this year, with a strong pipeline to
come.
We successfully completed the first phase of the rollout of our new ERP
system, which together with the Spectris Business System (SBS), represent key
building blocks towards Group operating margins of at least 20%. The new
system is working very well overall, although some of the cut-over issues that
have occurred, while typical with the complexity of a change of this
magnitude, impacted our results in the period. This is simply a timing issue
and we expect the impact to be fully recovered over the course of the second
half. We can already see the opportunity to significantly improve operating
effectiveness and efficiency through the deployment of the new system.
We are continuing the £150 million share buyback programme, with £100
million remaining. On completion, this will take the total amount of cash
returned to shareholders through share buybacks to £650 million over the last
5 years.
After three years of strong growth and against the backdrop of ongoing
macroeconomic uncertainty, we always expected 2024 to be a slower year, before
returning to growth in 2025 and 2026. Our first half performance compares with
a particularly strong comparative period last year (LFL sales growth of 19%).
As noted in our trading update on 19 June, our first half performance has been
impacted by two factors:
· First, softer underlying trading driven by weaker demand in
China, a significant reduction in battery development - associated with the
slowdown in sales of electric vehicles - and continued, subdued trading in
pharmaceuticals. This reduced sales and operating profit by around £15
million and £10 million respectively in the first half. As such, we will be
taking action to accelerate further self-help measures in the second half.
· In addition, the anticipated disruption to operations associated
with the global implementation of our new ERP system across Malvern
Panalytical in April, lasted longer than expected, resulting in the rephasing
of £ 22 million of sales and £15 million of operating profit to the second
half. While the quantum is slightly higher than originally estimated at the
time of our June update, we continue to expect to recover all of these sales
in the second half, with no impact on the full year.
Notwithstanding softer trading in the first half, we are encouraged by signs
that market conditions will improve in the second half, albeit the timing
remains uncertain. Our order book of £532 million at the end of the period
provides good visibility into the second half.
Outlook
Excluding any incremental profit associated with the acquisition of SciAps and
Micromeritics, we expect to deliver adjusted operating profit for the full
year in line with current market expectations 2 (#_ftn2) .
Financial performance
After adjusting for Red Lion, our order book at the end of June at £532
million was higher than the December year-end, providing good visibility into
the second half. Order intake of £613.9 million in the first half was 6%
lower than the comparative period on a LFL basis with continuing strong demand
and order growth in both A&D and Automotive, more than offset by softer
demand in other end markets, particularly Academia. On a LFL basis, demand in
both North America and Europe was solid with orders 3% lower in both regions,
with Asia down 12% driven by continuing softer markets in China.
LFL sales were 10% lower, down 16% on a reported basis, reflecting a 3pp net
impact from disposals and acquisitions and 3pp from adverse foreign exchange.
On a regional basis, sales were 9% lower in both North America and Europe with
sales 11% lower in Asia on a LFL basis.
LFL sales performance across our end markets is set out in the table below
with further information on end market trends contained in the reviews for the
Scientific and Dynamics divisions.
End market Sales Sales LFL sales Expected medium-term market growth
H1 2024 H1 2024 Growth
(£m) % of total Group
Life sciences / pharmaceutical 102 17% (22%) 5-7%
Technology-led industrials 109 19% (2%) 5-7%
Electronics and semiconductor 74 12% 4% 6-8%
Automotive 69 12% 0% 4-6%
Materials 59 10% (8%) 5-6%
Academic research 51 9% (21%) 5-6%
Other 126 21% (12%) 3-5%
The lower sales and product mix resulted in a 210bps decrease in adjusted
gross margins. Adjusted operating margin of 10.4%, was 410bps lower than the
comparative period (H1 2023: 14.5%) resulting in adjusted operating profit of
£61.1 million (H1 2023: £102.1 million) a decrease of 35% on a LFL basis
(40% on a reported basis).
Adjusted earnings per share was 38% lower at 47.9 pence (H1 2023: 77.2 pence).
Statutory operating profit of £24.0 million (H1 2023: £70.5 million) was 66%
lower. This gave a 4.1% statutory operating margin (H1 2023: 10.0%). Cash
conversion was 111% on an adjusted basis in the first half (H1 2023: 117%),
with our strong balance sheet providing the Group with significant
flexibility.
Strategic progress
We continue to make strong progress against the framework set out in October
2022, in our Strategy for Sustainable Growth, driven by our business model.
Under Spectris Scientific, we have brought together three complementary
precision instruments businesses: Malvern Panalytical, Particle Measuring
Systems and Servomex. Each of these businesses has leading positions at the
premium end of common markets, where their deep domain knowledge is essential
and drives high levels of customer centricity, where their depth of capability
and expertise play a vital role in making the invisible visible for our
customers. The acquisitions of Micromeritics and SciAps are both highly
complementary and will further add to these strengths. Additionally, as one
division of scale, this provides real opportunities to collaborate, sharing
best practice in areas like operational effectiveness, including common IT
systems and SBS as well as R&D.
In Spectris Dynamics we are pleased with the acquisition of MicroStrain which
completed at the end of last year, adding to the highly successful acquisition
of Dytran in 2022.
We invested £52.9 million (H1 2023: £52.2 million) in R&D in the first
half and launched a number of exciting, new products with more detail
contained in the divisional review sections. The initial customer response to
these products and others launched during the period has been extremely
positive, and with a strong pipeline and further launches to come over the
coming months, we expect 2024 to be a record year for new product
introductions for the Group, which will support future organic growth and
market share gains.
We continue to leverage SBS to drive operational excellence and deliver
tangible cost savings, remaining on track to deliver another c.£10 million in
savings in 2024. We have continued to develop and promote our 'Go For Gold'
programme with seven Bronze sites pursuing Silver and an additional five sites
targeting Bronze by the end of this year, with the aim to have all operational
sites certified Bronze by the end of 2025.
In April, we successfully completed the first phase of the rollout of our new
ERP system with the implementation covering the entire Malvern Panalytical
business. In the second half we will begin a phased roll out of the new system
across Spectris Dynamics which is expected to complete in 2025. The new system
replaces a number of legacy ERP systems and helps standardise, simplify and
automate processes to enhance our operations, enabling our businesses to
become more efficient and scalable.
We remain on track to meet our Net Zero ambition and a full update will be
provided at the year-end as we progress our Net Zero Transition Plan. At
Spectris, we recognise the importance of creating the right environment for
our people to thrive and develop and I am pleased to say that the work we have
done in this area has once again resulted in an increase in engagement levels
as measured by our annual employee engagement survey. In 2024, our
engagement scores increased to 4.00, increasing for the third successive year
and up from 3.92 in 2023 (2022: 3.86).
The strategic progress we have made in the first half is due to the hard work
of my colleagues and the continued execution of our Strategy for Sustainable
Growth, and I want to thank everyone across the Group for what we have
delivered.
Capital allocation
We had net cash position at the period end (30 June 2024) of £292.5 million
(30 June 2023: £214.3 million). This, together with good cash generation,
provides us with the flexibility to pursue our organic growth investment,
return capital to shareholders and execute our targeted M&A strategy.
On 4 July, we announced the acquisition of SciAps for consideration of up to
$260 million (£205 million), including a deferred element of $60 million,
which will be integrated into Malvern Panalytical within Spectris Scientific.
SciAps has a proven track record of growth and will add laser-induced,
backscatter spectroscopy (LIBS) technology to Malvern Panalytical's portfolio
and provide access to the adjacent hand-held XRF market. It will create a
highly synergistic combination, with SciAps handheld portfolio used in the
field, complementing Malvern Panalytical's range of laboratory and benchtop
equipment. When combined, we will provide a comprehensive suite of technology
offerings in attractive end markets, particularly mining, NDT and product
circularity/recycling, while also providing the ability to rapidly expand our
digital offering to these customers.
On 16 July, we announced an agreement to acquire Micromeritics Instrument
Corporation (Micromeritics) for upfront consideration of $630 million (£485
million) plus a deferred element up to $53 million (£41 million).
Micromeritics is a proven, high-margin, high-growth business which, together
with Malvern Panalytical will create the leading particle characterisation
business for advanced materials analysis, with a highly differentiated and
fully integrated offering. The addition of Micromeritics' technologies
alongside Malvern Panalytical's capabilities will enable the comprehensive
characterisation of particles by detailing their size, count, surface
properties and behaviour, thus supporting the entire customer workflow from
R&D to QC/QA applications. With highly complementary product portfolios,
the combination will also strengthen Spectris' offering in the rapidly
growing, clean tech markets and will deliver significant synergies.
These acquisitions will be funded through a combination of our cash resources
and new external debt, with the strong free cash flow generation of the Group
expected to bring leverage down to around 1.3x by the end of 2025 and below
1.0x beyond that.
We recognise the importance of a growing dividend to our shareholders and are
committed to a progressive dividend policy. The Board is declaring an interim
dividend of 26.6 pence per share, growth of 5% on last year (H1 2023: 25.3
pence). The interim dividend will be payable on 8 November to shareholders on
the register on 4 October 2024. The ex-dividend date is 3 October.
We completed the first £50 million tranche of our £150 million share buyback
during the period with £100 million remaining.
Board update
On 19 June, we announced that Derek Harding will take up a new role as
President of our enlarged Spectris Scientific Division from 1 September 2024.
Derek will remain on the Board as an Executive Director of the Company in his
new role and will continue to report to Andrew Heath, Chief Executive.
Angela Noon will join the company as an Executive Director and Chief Financial
Officer on 1 September 2024. Angela is currently CFO at Royal Mail and was
previously CFO for Siemens UK & Ireland.
Contacts:
Spectris plc
Andrew Heath, Chief Executive Officer
Derek Harding, Chief Financial Officer
Mathew Wootton, Director of Investor Relations
Teneo
Martin Robinson / Giles Kernick
+44 20 7353 4200
Analyst meeting and live webcast
A presentation to analysts and investors will take place at Bank of America, 2
King Edward Street, London, EC1A 1HQ begin at 08:00hrs BST, hosted by Andrew
Heath, Chief Executive and Derek Harding, Chief Financial Officer to discuss
this statement. The presentation will be broadcast live via the following
link:
https://www.investis-live.com/spectris/668d52cb99bcb24a0007c9c7/lkei
(https://www.investis-live.com/spectris/668d52cb99bcb24a0007c9c7/lkei)
Dial-In: United Kingdom (Local): +44 20 3936 2999 (tel:+442039362999) ;
United Kingdom (Toll-Free): +44 800 358 1035 (tel:+448003581035)
Global Dial-In Numbers
(https://url.uk.m.mimecastprotect.com/s/AkVRC0RwZhGlV3zuDh8t91NDp?domain=netroadshow.com)
Access Code: 485405
Copies of this press release are available to the public from the registered
office at Melbourne House, 44-46 Aldwych, London, WC2B 4LL and on the
Company's website at www.spectris.com (http://www.spectris.com) .
About Spectris
Spectris combines precision with purpose, delivering progress for a more
sustainable world. We provide critical insights to our customers through
premium precision measurement solutions combined with technical expertise and
deep domain knowledge. Precision is at the heart of what we do - our leading,
high-tech instruments and software equip our customers to solve some of their
greatest challenges to make the world cleaner, healthier and more productive.
We are focused on two key divisions - Spectris Scientific and Spectris
Dynamics, which are placed in technology-driven end markets, with strong
fundamentals and attractive growth trajectories. We have leading market
positions in premium segments and employ 7,000 people located in more than 30
countries, all united behind our purpose to deliver value beyond measure for
all our stakeholders. For more information, visit www.spectris.com
(http://www.spectris.com) .
Divisional reviews
Summary
Spectris Scientific Spectris Dynamics Red Lion Controls Group Costs Total
H1 2024 H1 2023 H1 2024 H1 2023 H1 2024 H1 2023 H1 2024 H1 2023 H1 2024 H1 2023
Sales (£m) 320.0 381.1 249.4 264.5 20.3 56.9 589.7 702.5
LFL sales growth (%) (12%) (5%) (28%) (10%)
Statutory operating profit (£m) 16.4 53.8 10.7 18.3 3.5 11.1 (6.6) (12.7) 24.0 70.5
Statutory operating margin (%) 5.1% 14.1% 4.3% 6.9% 17.2% 19.5% 4.1% 10.0%
Adjusted operating profit (£m) 33.4 65.7 30.6 35.8 3.7 13.3 (6.6) (12.7) 61.1 102.1
LFL adjusted operating profit change (%) (49%) (11%) (46%) (35%)
Adjusted operating margin (%) 10.4% 17.2% 12.3% 13.5% 18.2% 23.4% 10.4% 14.5%
LFL adjusted operating margin change (bps) (740bps) (80bps) (600bps) (400bps)
Sales % of Group sales 54% 54% 42% 38% 4% 8% 100% 100%
Spectris Scientific
H1 2024 H1 2023 Change LFL change
Statutory sales (£m) 320.0 381.1 (16%) (12%)
Adjusted operating profit(1) (£m) 33.4 65.7 (49%) (49%)
Adjusted operating margin(1) (%) 10.4% 17.2% (680bps) (740bps)
Statutory operating profit (£m) 16.4 53.8 (70%)
Statutory operating margin (%) 5.1% 14.1% (900bps)
1. This is an APM. APMs are defined in full and reconciled to the
reported statutory measures in the Appendix to the Condensed Consolidated
Interim Financial Statements.
First half performance
Against a strong comparative period, Spectris Scientific sales were 16% lower
in the period at £320.0 million (H1 2023: £381.1 million) with adjusted
operating profit of £33.4 million (H1 2023: £65.7 million). LFL sales were
12% lower after taking into account the £4 million (1%) impact of
acquisitions net of disposals (primarily the disposal of the remaining element
of CLS) and adverse foreign exchange movements of £12 million (3%). Lower
sales of £22 million and £15 million profit from the impact of delays
associated with the implementation of the new ERP system in Malvern
Panalytical are expected to be fully recovered in the second half.
While sales grew in electronics and semiconductor, this was offset by lower
sales in other end markets, particularly pharmaceuticals and academia. Sales
were lower across all regions. Orders intake was 15% lower (10% lower on a
LFL basis) with lower demand across all end markets particularly academia and
China.
Adjusted operating margin decreased by 680bps to 10.4% (H1 2023: 17.2%)
reflecting the negative drop through impact of lower sales volumes. On a LFL
basis, the decrease in adjusted operating margin was 740bps.
Statutory operating profit was 70% lower at £16.4 million (H1 2023: £53.8
million) after including £8.9 million of costs related to the investment in
our new ERP system, as part of the business transformation project. Statutory
operating margin was 5.1% (H1 2023: 14.1%).
Strongly positioned in high growth end markets supported by sustainability
trends
Spectris Scientific is focused on high growth end-markets: life sciences,
material sciences (primary and advanced materials), semiconductors and
academia. We are well positioned in high value, critical-to-quality areas
where precision measurement, domain expertise and analytics are valued by our
customers throughout the workflow.
Life sciences
LFL sales were significantly lower reflecting a continuation of overall
subdued conditions in this market with lower sales in all regions. In terms of
demand, order intake was more encouraging, down mid-single digits against the
comparative period. We continue to see strong demand and order growth for our
particle counters and advisory solutions for aseptic manufacturers reflecting
the production of new drugs to address areas like weight loss, and the
development of new facilities linked to onshoring.
Demand for instruments to support R&D and drug development remain subdued
particularly in small molecule, with the exception of the Indian market where
we saw growth across both small molecule and biologics during the period.
Our leading indicators are showing signs of improvement with an increase in
qualified leads which represent the earliest signs of customer demand.
Growth over the medium-term in life sciences is underpinned by a number of key
drivers including ageing populations, the onshoring of manufacturing and the
need to develop new treatments. We continue to maintain a healthy pipeline of
customer opportunities.
Materials
Primary materials
We saw a reduction in LFL sales and orders during the first half with a robust
performance from building materials more than offset by lower demand in
mining, against a strong comparator in 2023. Customers in this end market rely
on our leading X-ray products as they seek to make their extraction and
processing greener and more sustainable.
Advanced materials
Against a very strong comparator last year, LFL sales in advanced materials
were down in the first half, notably sales of our laser diffraction
instruments to support battery development, linked to the slowdown in EV sales
and the associated reduction in battery production and development. Our
particle analysers are used by customers to assess the quality and character
of particles to assess reactivity of raw materials.
While we are experiencing a slowdown in the short-term, the outlook for
advanced materials remains positive driven by the secular growth trends of
clean technologies and advanced manufacturing. We have a broad solution
portfolio and strong domain knowledge for material characterisation and deep
customer relationships which enables us to be a key facilitator of customer
innovation, supporting opportunities in the functional performance and QA/QC,
through to the sustainability and recycling of materials.
Semiconductor
Sales into semiconductor and electronics customers saw solid growth in the
period against a strong comparative period, with strong growth in Asia
partially offset by Europe and North America.
While the level of order intake was lower in the first half, we expect demand
to pick up in the second half and continue into 2025 and beyond driven by the
strong secular trends including onshoring, the rise of AI and increased
penetration of software-defined vehicles, as outlined in our teach-in on our
Particle Measuring Systems business at the start of June.
Academia
Against a very strong performance in the first half last year, where sales
increased by 45%, benefiting from a number of government incentives in China,
LFL sales and orders were significantly lower in the first half. While the
Chinese government has announced a similar package of incentives in the first
half, we are yet to see this feed through into customer demand as we did in
2023.
We remain well positioned to take advantage of the academic research that
feeds into our end markets, with a strong brand built on high precision
measurement and scientific credibility.
Other end markets
Sales and order intake across other end markets, which predominantly comprises
energy, were lower than the comparative period. Our offering across Spectris
Scientific means that we are well placed to address customer needs in the
energy transition over the medium-term, particularly in areas such as carbon
capture and hydrogen and growth in the adoption of clean technologies.
Research and development
In Malvern Panalytical we launched a number of exciting products during the
period. The Mastersizer 3000+, is a revolutionary step in particle sizing with
artificial intelligence-driven solutions for data evaluation providing robust
and confident results in what is our best-selling, market leading, laser
diffraction instrument. We also launched the Revontium X-ray fluorescence
analyser, representing a huge step in elemental analysis, providing the same
data quality as floor-standing instruments, significantly reducing operating
cost in a number of applications. And in March, Malvern Panalytical were the
proud winners of the Microsoft Intelligent Manufacturing Award 2024, in the
'Scale' category, for their Smart Return Agriculture technology.
At Servomex, we have been ushering in the next generation of ultra-trace
measurements for moisture, contaminants and ultra-high-purity electronic grade
gases, with the Gen 7 DF-500 Series delivering crystal clear insights, powered
by industry-leading sensors and setting the standard for accuracy and
reliability. And with the SERVOTOUGH SpectraExact 2500F, we have brought a new
level of precision to liquid measurements with its rugged design ideal for
hazardous areas, able to provide the most reliable data on even the harshest
of liquids.
At Particle Measuring Systems, the BioCapt Single-Use AutoM Microbial Impactor
represents the ideal choice for automated filling in sterile environments,
revolutionising microbial air sampling with a plug-and-play design to enhance
cost efficiency and productivity.
Spectris Dynamics
H1 2024 H1 2023 Change LFL change
Statutory sales (£m) 249.4 264.5 (6%) (5%)
Adjusted operating profit(1) (£m) 30.6 35.8 (15%) (11%)
Adjusted operating margin(1) (%) 12.3% 13.5% (120bps) (80bps)
Statutory operating profit (£m) 10.7 18.3 (42%)
Statutory operating margin (%) 4.3% 6.9% (260bps)
1. This is an APM. APMs are defined in full and reconciled to the
reported statutory measures in the Appendix to the Condensed Consolidated
Interim Financial Statements.
First half performance
Spectris Dynamics sales were 6% lower at £249.4 million (H1 2023: £264.5
million). On a LFL basis, sales were 5% lower after taking into account the
net impact of £9 million (3%) of adverse foreign exchange movements, and the
£7 million (2%) sales contribution from the acquisition of MicroStrain. Sales
were lower across all regions.
Order intake was in line with the comparative period on a LFL basis with
double-digit growth in both A&D and Automotive offset by softer demand in
machine manufacturing, academia and other markets. Slightly higher sales in
both A&D and Automotive were more than offset by lower sales to machine
manufacturing, academia and other markets.
Adjusted operating profit of £30.6 million was 15% lower than the £35.8
million achieved in the first half last year, (11% on a LFL basis), with
adjusted operating margin 120bps lower (80bps lower on a LFL basis) at 12.3%
(H1 2023: 13.5%). The lower margins reflect the drop through impact of lower
sales and product mix effects partially offset by actions to manage the
division's overhead costs.
Statutory operating profit decreased by 42% to £10.7 million (H1 2023: £18.3
million) after including £13.1 million of costs related to the investment in
our new ERP system. Statutory operating margin was 4.3% (H1 2023: 6.9%).
Well positioned in attractive markets
We are well positioned in attractive growth markets that are benefiting from a
number of global mega trends: increased adoption of Virtual Test particularly
in automotive to accelerate the innovation cycle; digitisation and the
increased use of software to design, test and to process large amounts of more
complex data; electrification and the transformation of mobility and energy;
and automation to enhance productivity in a more connected world. These four
key growth trends are aligned with the Division's Purpose to Empower the
Innovators for a cleaner, healthier, and more productive world and are
supporting higher levels of growth within our market segments.
Automotive
LFL sales were slightly ahead of the comparative period, with modest growth in
Europe offset by North America where sales were down. LFL Sales in Asia were
slightly lower than the comparative period.
On the demand side, order intake was strong, particularly in Asia and Europe,
largely driven by our virtual test business, where our market-leading offering
continues to attract new customers with a number of large orders for our
simulators booked during the period. Demand was softer in the US reflecting
the slowdown in demand for, and adoption of, electric vehicles and the
knock-on impact on battery development and electric power testing. Demand from
Chinese automotive manufacturers for our in-process solutions for end of line
testing of electric motors was encouraging.
Over the medium-term, we continue to expect growing demand for automotive
testing, driven by growth in R&D and increased adoption of virtual test to
support new platform launches and increasing demand for software-defined
vehicles and advanced driver assistance systems (ADAS) capabilities.
Machine manufacturing
LFL sales were lower in Europe and Asia reflecting ongoing soft industrial
output in the key markets in each region, namely Germany and China.
Orders were only slightly lower on a LFL basis, with softer demand in Europe
and North America which more than offset strong growth in Asia. While we have
seen signs of a modest recovery in weighing technology, a broader recovery is
expected to occur in late 2024 and into the first half of 2025, as interest
rate ease and customer confidence returns to support capital investment
decisions.
2023 was a record year in our OEM sensor business delivering 55 customer
prototypes during the year. This strong trend has continued in the first half
of this year where we have delivered a similar number of prototypes on a run
rate basis across a number of sub-segments including medical, agricultural and
robotics.
We believe that over the medium to longer-term, the move towards greater
levels of automation driven by the scarcity of labour and the need for greater
efficiency, will continue to drive demand from machine manufacturing customers
and in turn, our smart and OEM sensor offering. Sales to this sector continue
to be helped by the focus on selected high value end-markets, which has driven
demand for our weighing technologies, including for smart OEM-type solutions
in medical and healthcare applications, where accurate and reliable sensors
are critical.
Aerospace and defence
Sales were slightly ahead of the very strong comparative period, supported by
continued investment in commercial space and defence spending and the ongoing
growth in civil aerospace. LFL orders were well ahead of the comparative
period driven by strong demand in the US.
Demand has been particularly strong in commercial space, where our leading
sensing solutions, in particular accelerometers, are used by customers to
monitor vehicle system and structural performance during the flight
envelope. Our Dytran business has performed particularly well
post-acquisition due to the growth of, and attractiveness of its offering to,
the commercial space market. In civil aerospace, we have seen good demand for
our physical testing solutions where our customers rely on the reliability,
precision and consistency provided by our sound and vibration and design
software. In defence, we see a lot of opportunities to support customers on
a number of naval programmes and on a regional basis, strong demand in Japan.
We remain well placed to support long-term innovation projects. OEMs continue
to invest in efficiency gaining technologies, especially weight saving and
power improvements. We also see demand increasing for energy transition
related projects, including electric aircraft and those running on alternative
lower-carbon fuels.
Consumer electronics and telecoms
While LFL sales were down in consumer electronics and telecoms, which
represented 6% of Dynamics sales in the first half, order intake was up.
Demand in this market is being shaped by the onshoring of manufacturing and
the development of the next generation of sound technology, including
immersive, dynamic sound quality for personal equipment.
Research and development
During the first half we launched the award-winning Driver-in-Motion Full
Spectrum Dynamic Simulator (DiM FSS) and Hyperdock, which together provide a
quantum leap in realism, and the first simulator that is capable of full
vehicle motion, vibration, and sound for an integrated experience. We also
introduced the T100 / T110 torque sensor, building on market leading accuracy,
that offers new possibilities in demanding applications, such as powertrain
development for electric vehicles.
We also released major updates to our simulation and durability/reliability
software with key functionality enhancements. One example is the latest
upgrade of Concurrent Real Time's (CCRT) FPGA Workbench suite, which
represents a complete development environment for Hardware-in-the-loop
solutions and other simulators, enabling users to use the full potential of
the latest CCRT hardware.
Financial review
Financial performance
H1 2024 H1 2023
£m £m
Sales 589.7 702.5
Cost of sales (265.7) (302.0)
Gross profit 324.0 400.5
Indirect production and engineering expenses (59.5) (63.0)
Sales and marketing expenses (115.1) (129.0)
Administrative expenses (125.4) (138.0)
Operating profit 24.0 70.5
Sales decreased by 16% or £112.8 million to £589.7 million (H1 2023: £702.5
million). Gross profit decreased by £76.5 million driven by the lower sales
volumes, partly offset by pricing effects. Selling, General &
Administration (SG&A) expenses decreased by £30.0 million, benefiting
from prior period restructuring activities, the sale of Red Lion, foreign
exchange impacts from retranslation and revaluation, plus lower performance
incentives.
Included within SG&A are configuration and customisation costs carried out
by third parties on material software-as-a-Service (SaaS) project costs of
£22.0 million (H1 2023: £17.8 million), which represents the continuation of
the implementation of the new SAP cloud-based ERP system. Investment in
R&D increased by £0.7 million to £52.9 million representing 9.0% of
sales (H1 2023: £52.2 million, 7.4% of sales). Statutory operating profit
was £24.0 million, a decrease of £46.5 million (H1 2023: £70.5 million).
Statutory operating margin was 4.1% (H1 2023: 10.0%).
Statutory to adjusted operating profit
H1 2024 H1 2023
£m £m
Statutory operating profit 24.0 70.5
Net transaction-related costs and fair value adjustments 7.4 4.0
Configuration and customisation costs carried out by third parties on material 22.0 17.8
SaaS projects
Amortisation of acquisition-related intangible assets 7.7 9.8
Adjusted operating profit 61.1 102.1
Net transaction-related costs and fair value adjustments were £7.4 million
(H1 2023: £4.0 million) primarily relating to the acquisitions of SciAps
Incorporated and Micomeritics Instruments announced in July 2024. Consistent
with the prior period, material SaaS project costs of £22.0 million (H1 2023:
£17.8 million) are excluded from adjusted operating profit, as is
amortisation of acquisition-related intangible assets of £7.7 million (H1
2023: £9.8 million).
Our adjusted operating margin of 10.4% was 410bps lower than the comparative
period (H1 2023: 14.5%) driven by the drop through impact of lower sales and
product mix, resulting in an adjusted operating profit of £61.1 million (H1
2023: £102.1 million), a decrease of 40% (35% on a LFL basis).
Statutory operating profit to profit before tax
Statutory profit before tax for the period of £235.3 million (H1 2023: £68.5
million) is calculated after a £210.6 million profit on disposal of
businesses, predominantly related to the divestment of Red Lion (H1 2023:
£11.0 million loss, which reflected the divestment of Concept Life Sciences),
and a net finance income of £5.3 million (H1 2023: £8.2 million income).
H1 2024 H1 2023
£m £m
Statutory operating profit 24.0 70.5
Share of post-tax results of associates (0.4) 0.1
Fair value through profit and loss movements on debt instruments (4.2) 0.7
Profit/(loss) on disposal of businesses 210.6 (11.0)
Finance income 8.2 10.3
Finance costs (2.9) (2.1)
Statutory profit before tax 235.3 68.5
On 3 April 2024, the Group disposed of its Red Lion Controls business. The
consideration received was £280.9 million settled in cash, resulting in a
profit on disposal of £210.9 million. Further details are provided in note 8.
Red Lion Controls contributed £20.3 million of sales and operating profit of
£3.7 million in 2024, up to the date of disposal (H1 2023: £56.9 million
sales and £13.3 million operating profit, reflecting full six months
contribution).
Net finance income of £5.3 million (H1 2023: £8.2 million) was £2.9 million
lower, mainly as a result of a £3.7 million lower gain from retranslation of
short-term intercompany loan balances driven by a smaller intercompany loan
balance and lower levels of currency volatility than in 2023.
Bank interest received was £4.9 million for the period (H1 2023: £3.3
million), mainly due to cash held on account from the proceeds of the Red Lion
disposal and higher Sterling interest rates. There have been no drawings
against our loan facilities during the first half, with interest payable
comprising the commitment fee on the Revolving Credit Facility (RCF) and the
amortisation of capitalised loan fees relating to this facility.
Tax
The effective tax rate on adjusted profit before tax for was 23% (H1 2023:
22%), with the adjusted effective tax rate for the full year also expected to
be 23%. The effective tax rate on statutory profit before tax was 23.1% (H1
2023: 23.8%).
Earnings per share
Adjusted earnings per share was 47.9 pence (H1 2023: 77.2 pence). Statutory
earnings per share was 179.6 pence (H1 2023: 50.0 pence), with most of the
increase attributable to the £210.9 million profit on disposal of the Red
Lion Controls business.
LFL movements
Order intake was 6% lower on a LFL basis for the first half of 2024. On a LFL
basis, orders in North America and Europe were both down 3%, with Asia 12%
lower largely driven by China where demand remains subdued.
LFL sales decreased by £66.6 million (10%), comprising 12% volume, partially
offset by a 2% positive price impact. Disposals, net of acquisitions,
reduced sales by £24.7 million (3%) and foreign exchange movements decreased
sales by £21.5 million (3%), which together with the LFL sales movement
resulted in a 16% reduction in reported sales.
The sales decline resulted in a 210bps decrease in adjusted gross margins.
Cash flow
Adjusted cash flow decreased by £51.8 million to £67.9 million (H1 2023:
£119.7 million), resulting in an adjusted cash conversion rate of 111% (H1
2023: 117%). Statutory cash generated from operations was £57.4 million (H1
2023: £108.9 million).
The decrease in adjusted cash flow was largely driven by the decrease in
adjusted operating profit, with a slightly lower net inflow in working capital
and higher levels of capital expenditure also contributing.
H1 2024 H1 2023
Adjusted cash flow £m £m
Adjusted operating profit 61.1 102.1
Adjusted depreciation and software amortisation(1) 17.7 19.6
Working capital and other non-cash movements 4.9 9.7
Capital expenditure (15.8) (11.7)
Adjusted cash flow 67.9 119.7
Adjusted cash flow conversion 111% 117%
1. Adjusted depreciation and software amortisation represent depreciation of
property, plant and equipment, software and internal development amortisation,
adjusted for depreciation of acquisition-related fair value adjustments to
property, plant and equipment.
Capital expenditure of £15.8 million (H1 2023: £11.7 million) equated to
2.7% of sales, compared to 1.7% in H1 2023. The higher level of expenditure in
2024 reflects the phasing of spend relating to the new PMS facility in
Colorado. Capital expenditure was 89% of adjusted depreciation and software
amortisation (H1 2023: 60%).
H1 2024 H1 2023
Other cash flows and foreign exchange £m £m
Tax paid (26.8) (30.0)
Net interest received on cash and borrowings 2.4 2.9
Dividends paid (54.2) (53.7)
Share buyback (46.0) (26.7)
Acquisition of businesses, net of cash acquired (0.8) (2.8)
Transaction-related costs paid (2.8) (1.0)
Spectris Foundation Contribution paid (1.0) -
Proceeds from disposal of businesses, net of tax paid of £25.2 million (H1 248.8 9.2
2023: £1.0 million)
SaaS-related cash expenditure (22.0) (17.8)
Lease payments and associated interest (7.3) (7.1)
Restructuring costs paid (0.1) (0.8)
Net proceeds from exercise of share options 0.5 0.4
Total other cash flows 90.7 (127.4)
Adjusted cash flow 67.9 119.7
Foreign exchange (4.9) (6.0)
Increase/(decrease) in net cash 153.7 (13.7)
During the six months ended 30 June 2024, 1,313,979 ordinary shares were
repurchased and cancelled by the Group as part of the first tranche of the
£150 million share buyback programme announced on 11 December 2023, resulting
in a cash outflow of £46.0 million, including transaction fees of £0.2
million. We expect to complete the remaining £100 million of the current
buyback programme by the end of this financial year.
Financing and treasury
The Group finances its operations from retained earnings and, where
appropriate, from third-party borrowings. Total borrowings as at 30 June 2024
were £nil (H1 2023: £nil).
At 30 June 2024, the Group had a cash and cash equivalents balance of £292.5
million (H1 2023: £214.3 million) representing a £78.2 million year-on-year
increase in net cash. The Group also had various uncommitted credit lines and
bank overdraft facilities available that remained undrawn.
On 7 May 2024, the $500m multi-currency facility (RCF) due to expire in July
2025 was replaced by a £400 million multi-currency facility to reflect the
base currency of the Group. The new facility has an initial five-year
maturity with two one-year extension options, which would take the final
maturity to May 2031. As at 30 June 2024, the Group's committed facilities
consisted entirely of the £400 million RCF, which was undrawn. (H1 2023: $500
million undrawn).
The Group regularly monitors its financial position to ensure that it remains
within the terms of its RCF covenants. The minimum permitted interest cover
(i) is 3.75x; the covenant result was N/A for the twelve-month period ended 30
June 2024 due to net interest income during the period (30 June 2023: N/A; 31
December 2023: N/A). The maximum permitted leverage (ii) is 3.5x; as at 30
June 2024, leverage was less than zero (30 June 2023: less than zero; 31
December 2023: less than zero) due to the Group's net cash position.
(i) Covenant defined earnings before interest, tax and amortisation
divided by net finance charges; and
(ii) Covenant-defined net debt / EBITDA
The Group has prepared and reviewed cash flow forecasts for the period to 31
December 2028, which reflect forecasted changes in sales across its business
and performed a reverse stress test of the forecasts to determine the extent
of downturn which would result in insufficient liquidity or a breach of
banking covenants. The Group's cash flow forecast reflects the acquisitions
announced recently and includes securing additional external finance. The
group has sourced sufficient bridge financing and is working with lenders to
finalise terms on long term financing. This assessment indicates that the
Group can operate within the level of its current facilities, without the need
to obtain any new facilities for a period of not less than 12 months from the
date of this report. The Board of Directors are satisfied that the Group has
sufficient resources to continue in operation for a period of not less than 12
months from the date of this report. Accordingly, it continues to adopt the
going concern basis in relation to this conclusion and preparing the Condensed
Consolidated Financial Statements.
Currency
The Group has both translational and transactional currency exposures.
Translational exposures arise on the consolidation of overseas company results
into Sterling. Transactional exposures arise where the currency of sale or
purchase invoices differs from the functional currency in which each company
prepares its local accounts. The transactional exposures include situations
where foreign currency denominated trade receivables, trade payables and cash
balances are held.
After matching the currency of revenue with the currency of costs, wherever
practical, forward exchange contracts are used to hedge a proportion of the
remaining forecast net transaction cash flows where there is reasonable
certainty of an exposure. At 30 June 2024, approximately 65% of the estimated
transactional exposures of £250.9 million for the next 18 months were hedged
using forward exchange contracts, mainly against the Euro, US Dollar, Chinese
Yuan Renminbi and Japanese Yen.
The largest translational exposures during the year were to the US Dollar,
Euro and Chinese Yuan Renminbi. Translational exposures are not hedged. The
table below shows the average and closing key exchange rates compared to
Sterling.
H1 2024 H1 2023 H1 2024 H1 2023
(average) (average) Change (closing) (closing) Change
US Dollar (USD) 1.26 1.23 2% 1.26 1.27 (1%)
Euro (EUR) 1.17 1.14 3% 1.18 1.16 2%
Chinese Yuan Renminbi (CNY) 9.12 8.55 7% 9.18 9.22 0%
During the period, currency translation effects resulted in adjusted operating
profit being £1.4 million lower (H1 2023: £2.8 million higher) than it would
have been if calculated using prior year exchange rates.
Transactional foreign exchange losses of £1.2 million (H1 2023: £4.6 million
loss) were included in administrative expenses, whilst sales include a gain of
£3.2 million (H1 2023: £0.9 million gain) arising on forward exchange
contracts taken out to hedge transactional exposures in respect of sales.
Derek Harding
Chief Financial Officer
Principal Risks and Uncertainties
A number of potential risks and uncertainties exist which could have a
material impact on the Group's performance over the second half of the
financial year and could cause actual results to differ materially from
expected and historical results. The Group has processes in place for
identifying, evaluating and managing the key risks which could have an impact
upon the Group's performance.
The current risks, together with a description of how they relate to the
Group's strategy and the approach to managing them, are set out on pages 46-50
of the 2023 Annual Report and Accounts which is available on the Group's
website at www.spectris.com (http://www.spectris.com) . The Group has
conducted a review and concluded that these risks, as defined in the 2023
Annual Report, will continue to remain relevant for the second half of the
financial year and that our assessment of the severity of these risks on both
a gross and a net basis is unchanged. The potential impact of these risks on
our strategy and financial performance, together with details of our specific
mitigation actions, are set out in the 2023 Annual Report.
The full list of principal risks relevant as at the half year comprises:
· Strategic transformation. Failure to successfully deliver the
Group strategy, including business transformation and key mergers,
acquisitions and divestment activity.
· Cyber threat. Failure to appropriately protect critical
information and other assets from cyber threats, including external hacking,
cyber fraud, demands for ransom payments and inadvertent/intentional
electronic leakage of critical data.
· Compliance. Failure to comply with laws and regulations, leading
to reputational damage, substantial fines and potential market exclusion.
· Geopolitical. Material adverse changes in the geopolitical
environment putting at risk our ability to execute our strategy. Includes
trade protectionism, punitive tax/regulatory regimes, and general heightened
tension between trading parties or blocs.
· Market/financial shock. Material adverse changes in market
conditions, such as economic recession, inflation, sudden negative investor
sentiment and currency fluctuation.
· Talent and capabilities. Failure to attract, retain, and deploy
the necessary talent to deliver Group strategy.
· Business disruption. Failure to appropriately prepare for and
respond to a crisis or major disruption to key operations either across the
Group, in a key region/location, or via a critical supplier.
· Climate change. Failure to respond appropriately, and
sufficiently, to climate change risks or failure to identify the associated
potential opportunities in assisting others manage their climate agendas.
These risks are subject to Executive oversight and formal assessment, and we
continue to review the effectiveness of existing controls over those risks and
to identify further actions where appropriate in order to manage our net
exposure.
Condensed Consolidated Income Statement
For the six months ended 30 June 2024
Six months ended 30 June Year ended 31 December
2024 2023 2023
(Unaudited) (Unaudited) (Audited)
Note £m £m £m
Revenue 2 589.7 702.5 1,449.2
Cost of sales (265.7) (302.0) (611.1)
Gross profit 324.0 400.5 838.1
Indirect production and engineering expenses (59.5) (63.0) (126.9)
Sales and marketing expenses (115.1) (129.0) (249.6)
Administrative expenses (125.4) (138.0) (273.0)
Operating profit 2 24.0 70.5 188.6
Share of post-tax results of associates (0.4) 0.1 (0.1)
Fair value through profit and loss movements on debt investment (4.2) 0.7 2.8
Profit/(loss) on disposal of businesses 8 210.6 (11.0) (12.6)
Financial income 3 8.2 10.3 11.0
Finance costs 3 (2.9) (2.1) (4.1)
Profit before tax 235.3 68.5 185.6
Taxation charge 4 (54.3) (16.3) (40.2)
Profit for the period 181.0 52.2 145.4
Attributable to:
Equity holders of the parent 181.0 52.2 145.4
Non-controlling interest - - -
181.0 52.2 145.4
Earnings per share for profit attributable to the ordinary equity holders of
the Company
Basic 6 179.6p 50.0p 140.3p
Diluted 6 178.7p 49.7p 139.4p
Dividends attributable to the ordinary equity holders of the Company
Interim and final dividends proposed/paid for the period (per share) 5 26.6p 25.3p 79.2p
Dividends paid during the period (per share) 5 53.9p 51.3p 76.6p
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2024
Six months ended 30 June Year ended 31 December
2024 2023 2023
(Unaudited) (Unaudited) (Audited)
Note £m £m £m
Profit for the period attributable to owners of the Company 181.0 52.2 145.4
Other comprehensive income:
Items that will not be reclassified to the Condensed Consolidated Income
Statement:
Re-measurement of net defined benefit obligation 0.1 (0.4) (0.6)
Fair value loss and foreign exchange movements translation on investment in (0.8) (3.0) (5.0)
equity instruments designated as at fair value through other comprehensive
income
Tax (charge)/credit on items above (0.1) 0.1 0.2
(0.8) (3.3) (5.4)
Items that are or may be reclassified subsequently to the Condensed
Consolidated Income Statement:
Net (loss)/gain on effective portion of changes in fair value of forward (2.6) 6.7 6.1
exchange contracts on cash flow hedges
Foreign exchange movements on translation of overseas operations (19.1) (52.2) (42.5)
Currency translation differences transferred to profit on disposal of 8 (17.9) - -
businesses
Tax credit/(charge) on items above 0.4 (1.6) (1.1)
(39.2) (47.1) (37.5)
Total other comprehensive loss (40.0) (50.4) (42.9)
Total comprehensive income for the period 141.0 1.8 102.5
Attributable to:
Equity holders of the parent 141.0 1.8 102.5
Non-controlling interest - - -
141.0 1.8 102.5
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2024
Share capital Share premium Retained earnings Translation reserve Hedging reserve Merger reserve Capital redemption reserve Total Non-controlling interest Total equity
£m £m £m £m £m £m £m £m £m £m
At 1 January 2024 5.3 231.4 1,030.0 43.0 1.9 3.1 1.2 1,315.9 - 1,315.9
Profit for the period - - 181.0 - - - - 181.0 - 181.0
Other comprehensive loss - - (0.2) (37.4) (2.4) - - (40.0) - (40.0)
Total comprehensive income/(loss) for the period - - 180.8 (37.4) (2.4) - - 141.0 - 141.0
Transactions with owners recorded directly in equity:
Equity dividends paid by the Company (note 5) - - (54.2) - - - - (54.2) - (54.2)
Own shares acquired for share buyback programme (note 10) (0.1) - (0.2) - - - 0.1 (0.2) - (0.2)
Share-based payments, net of tax - - 4.8 - - - - 4.8 - 4.8
Proceeds from exercise of equity-settled share options - - 0.5 - - - - 0.5 - 0.5
Acquisition of a subsidiary (note 7) - - - - - - - - 0.4 0.4
At 30 June 2024 (Unaudited) 5.2 231.4 1,161.7 5.6 (0.5) 3.1 1.3 1,407.8 0.4 1,408.2
For the six months ended 30 June 2023
Share capital Share premium Retained earnings Translation reserve Hedging reserve Merger reserve Capital redemption reserve Total equity
£m £m £m £m £m £m £m £m
At 1 January 2023 5.5 231.4 1,113.0 86.0 (3.1) 3.1 1.0 1,436.9
Profit for the period - - 52.2 - - - - 52.2
Other comprehensive (loss)/income - - (2.5) (53.0) 5.1 - - (50.4)
Total comprehensive income/(loss) for the period - - 49.7 (53.0) 5.1 - - 1.8
Transactions with owners recorded directly in equity:
Equity dividends paid by the Company (note 5) - - (53.7) - - - - (53.7)
Own shares acquired for share buyback programme (note 10) (0.1) - (40.0) - - - 0.1 (40.0)
Share-based payments, net of tax - - 10.0 - - - - 10.0
Proceeds from exercise of equity-settled share options - - 0.4 - - - - 0.4
At 30 June 2023 (Unaudited) 5.4 231.4 1,079.4 33.0 2.0 3.1 1.1 1,355.4
For the year ended 31 December 2023
Share capital Share premium Retained earnings Translation reserve Hedging reserve Merger reserve Capital redemption reserve Total equity
£m £m £m £m £m £m £m £m
At 1 January 2023 5.5 231.4 1,113.0 86.0 (3.1) 3.1 1.0 1,436.9
Profit for the year - - 145.4 - - - - 145.4
Other comprehensive (loss)/income - - (4.9) (43.0) 5.0 - - (42.9)
Total comprehensive income/(loss) for the year - - 140.5 (43.0) 5.0 - - 102.5
Transactions with owners recorded directly in equity:
Equity dividends paid by the Company (note 5) - - (79.7) - - - - (79.7)
Own shares acquired for share buyback programme (note 10) (0.2) - (160.8) - - - 0.2 (160.8)
Share-based payments, net of tax - - 16.4 - - - - 16.4
Proceeds from exercise of equity-settled share options - - 0.6 - - - - 0.6
At 31 December 2023 (Audited) 5.3 231.4 1,030.0 43.0 1.9 3.1 1.2 1,315.9
Condensed Consolidated Statement of Financial Position
As at 30 June 2024
30 June 30 June 31 December
2024 2023 2023
(Unaudited) (Unaudited) (Audited)
Note £m £m £m
ASSETS
Non-current assets
Goodwill 566.7 583.6 565.5
Other intangible assets 158.0 162.3 167.1
Property, plant and equipment 140.0 142.8 136.2
Right-of-use assets 56.1 57.5 58.1
Investment in equity instruments 23.5 26.3 24.3
Investment in debt instruments 17.5 19.6 21.7
Investment in associates 10.4 2.9 10.8
Derivative financial instruments 0.1 0.7 0.4
Other receivables 7.7 4.4 5.9
Deferred tax assets 28.6 20.1 26.6
Retirement benefit assets 2.2 - 2.4
1,010.8 1,020.2 1,019.0
Current assets
Inventories 238.0 261.4 231.8
Current tax assets 12.9 11.9 7.2
Trade and other receivables 287.6 316.6 317.9
Derivative financial instruments 4.0 6.3 5.8
Cash and cash equivalents 292.5 214.3 138.5
Assets held for sale - - 97.5
835.0 810.5 798.7
Total assets 1,845.8 1,830.7 1,817.7
LIABILITIES
Current liabilities
Derivative financial instruments (0.5) (0.3) (0.1)
Trade and other payables (309.1) (355.2) (369.4)
Lease liabilities (12.5) (12.1) (14.4)
Current tax liabilities (23.7) (9.3) (12.6)
Provisions (8.7) (12.2) (8.5)
Liabilities held for sale - - (17.8)
(354.5) (389.1) (422.8)
Net current assets 480.5 421.4 375.9
Non-current liabilities
Other payables (19.7) (13.7) (15.1)
Derivative financial instruments (0.2) - (0.1)
Lease liabilities (49.0) (50.3) (48.3)
Provisions (2.7) (3.0) (2.6)
Retirement benefit obligations (10.2) (8.1) (11.6)
Deferred tax liabilities (1.3) (11.1) (1.3)
(83.1) (86.2) (79.0)
Total liabilities (437.6) (475.3) (501.8)
Net assets 1,408.2 1,355.4 1,315.9
EQUITY
Share capital 5.2 5.4 5.3
Share premium 231.4 231.4 231.4
Retained earnings 1,161.7 1,079.4 1,030.0
Translation reserve 5.6 33.0 43.0
Hedging reserve (0.5) 2.0 1.9
Merger reserve 3.1 3.1 3.1
Capital redemption reserve 1.3 1.1 1.2
Total equity attributable to equity holders of the parent 1,407.8 1,355.4 1,315.9
Non-controlling interest 7 0.4 - -
Total equity 1,408.2 1,355.4 1,315.9
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2024
Six months ended 30 June Year ended 31 December
2024 2023 2023
(Unaudited) (Unaudited) (Audited)
Note £m £m £m
Cash generated from operations 9 57.4 108.9 245.5
Net income taxes paid (26.8) (30.0) (50.3)
Net cash inflow from operating activities 30.6 78.9 195.2
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets (15.8) (11.7) (24.7)
Proceeds from disposal of property, plant and equipment and software 0.4 2.9 3.1
Acquisition of businesses, net of cash acquired (0.8) (2.8) (49.5)
Acquisition of investment in an associates - - (7.8)
Inflow from disposal of businesses, net of tax paid of £25.2m (H1 2023: 248.8 9.2 3.3
£1.0m and FY 2023: £5.9m)
Interest received 5.0 3.4 5.4
Net cash flows from/(used in) investing activities 237.6 1.0 (70.2)
Cash flows (used in)/from financing activities
Interest paid on borrowings (2.6) (0.5) (1.0)
Interest paid on lease liabilities (1.4) (1.2) (0.2)
Dividends paid to equity holders of the parent 5 (54.2) (53.7) (79.7)
Share buyback purchase of shares 10 (46.0) (26.7) (114.9)
Net proceeds from exercise of share options 0.5 0.4 0.6
Payments on principal portion of lease liabilities (5.9) (5.9) (15.4)
Repayment of borrowings - (0.1) (0.1)
Net cash flows used in financing activities (109.6) (87.7) (210.7)
Net increase/(decrease) in cash and cash equivalents 158.6 (7.8) (85.7)
Cash and cash equivalents at beginning of period 138.8 228.1 228.1
Effect of foreign exchange rate changes (4.9) (6.0) (3.6)
Cash and cash equivalents at end of period(1) 292.5 214.3 138.8
1. Cash and cash equivalents in the Condensed Consolidated Statement
of Cash Flows at 31 December 2023 consisted of £138.5 million of cash and
cash equivalents included in current assets and £0.3 million of cash and cash
equivalents included in assets held for sale.
Notes to the condensed set of financial statements
Six months ended 30 June 2024
1. Basis of preparation and accounting policies
a) Basis of accounting
The Condensed Consolidated Interim Financial Statements of the Company for the
six months ended 30 June 2024 comprise the Company and its subsidiaries,
together referred to as the 'Group'. These Condensed Consolidated Interim
Financial Statements are presented in millions of Sterling rounded to the
nearest one decimal place, which is the Group's presentational currency. The
Consolidated Financial Statements of the Group for the year ended 31 December
2023 are available upon request from the Company's registered office at
Melbourne House, 44-46 Aldwych, London, WC2B 4LL, and on the Company's website
at www.spectris.com (http://www.spectris.com) .
These Condensed Consolidated Interim Financial Statements have been prepared
in accordance with the Disclosure and Transparency Rules of the Financial
Conduct Authority and with IAS 34, 'Interim Financial Reporting', as adopted
by the United Kingdom. They do not include all of the information required for
full annual financial statements and should be read in conjunction with the
Consolidated Financial Statements of the Group for the year ended 31 December
2023.
The Condensed Consolidated Financial Statements have been prepared using
consistent accounting policies with those of the previous financial year
except for the adoption of new accounting standards and interpretations noted
below.
The Condensed Consolidated Interim Financial Statements for the six-month
period ended 30 June 2024 are unaudited but have been subject to an
independent review by the auditor. They do not constitute statutory financial
statements as defined in section 434 of the Companies Act 2006. The
comparative figures for the financial year ended 31 December 2023 are derived
from the Company's statutory accounts for that financial year. Those accounts
have been reported on by the Company's auditor and delivered to the Registrar
of Companies. The Report of the auditor was (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report, and (iii) did not contain a
statement under section 498(2) or 498(3) of the Companies Act 2006.
The Group's financial risk management objectives and policies are consistent
with those disclosed in the Consolidated Financial Statements of the Group for
the year ended 31 December 2023. These Condensed Consolidated Interim
Financial Statements were approved by the Board of Directors on 29 July 2024.
New standards and interpretations applied for the first time
There were no new standards, amendments or interpretations applied for the
first time that had a material impact for the Group.
New standards and interpretations not yet applied
There were no new or revised IFRSs, amendments or interpretations in issue but
not yet effective that are potentially material for the Group and which have
not yet been applied.
b) Going concern
In determining the basis of preparation for the Condensed Consolidated
Financial Statements, the Directors have considered the Group's available
resources, current business activities and factors likely to impact on its
future development and performance, including the impact of economic factors
such as rising interest rates and inflation as well as climate change on the
Group, which are described in the Chief Executive's Review, Financial Review
and Operating Review.
The Group finances its operations from retained earnings and, where
appropriate, from third-party borrowings. Total borrowings as at 30 June 2024
were £nil (H1 2023: £nil; FY 2023 £nil).
On 7 May 2024, the $500m multi-currency facility (RCF) due to expire in July
2025 was replaced by a £400m multi-currency facility, to reflect the base
currency of the Group. The new facility has an initial five-year maturity with
two one-year extension options, which would take the final maturity to May
2031. The facility continues to consist of 8 members in the banking group,
however two existing banks (JP Morgan and Santander) left the banking group,
and two new banks (Bank of America and Citizens) joined. As at 30 June 2024
the Group's committed facilities consisted entirely of the £400m RCF, which
was undrawn. (H1 2023: $500 million undrawn; FY 2023: $500 million undrawn).
The Group regularly monitors its financial position to ensure that it remains
within the terms of its RCF covenants. The minimum permitted interest cover
(i) is 3.75x; the covenant result was N/A for the twelve month period ended 30
June 2024 due to net interest income during the period (30 June 2023: N/A; 31
December 2023: N/A). The maximum permitted leverage (ii) is 3.5x; as at 30
June 2024, leverage was less than zero (30 June 2023: less than zero; 31
December 2023: less than zero) due to the Group's net cash position.
(i) Covenant defined earnings before interest, tax and amortisation
divided by net finance charges; and
(ii) Covenant-defined net debt / EBITDA
At 30 June 2024, the Group had a cash and cash equivalents balance of £292.5
million. The Group also had various uncommitted credit lines and bank
overdraft facilities available.
The Group has prepared and reviewed cash flow forecasts for the period to 31
December 2028, which reflect forecasted changes in revenue across its business
and compared these to a reverse stress test of the forecasts to determine the
extent of downturn which would result in a breach of covenants. The reverse
stress test does not take into account any mitigating actions which the Group
would implement in the event of a severe and extended revenue decline, which
would increase the headroom further. The Group's cash flow forecast reflects
the acquisitions announced recently and includes securing additional external
finance. The group has sourced sufficient bridge financing and is working
with lenders to finalise terms on long term financing. This assessment
indicates that the Group can operate within the level of its current
facilities, as set out above, without the need to obtain any new facilities
for a period of not less than 12 months from the date of this report.
c) Seasonality
The Group's financial results and cash flows have, historically, been subject
to seasonal trends between the first and second half of the financial year.
Historically, the second half of the financial year sees higher revenue and
profitability. There is no assurance that this trend will continue in the
future.
d) Critical accounting judgments and key sources of estimation uncertainty
update
In determining and applying accounting policies, judgement is often required
where the choice of specific policy, assumption or accounting estimate to be
followed could materially affect the reported amounts of assets, liabilities,
income and expenses, should it be determined that a different choice be more
appropriate. Estimates and assumptions are reviewed on an ongoing basis and
are based on historical experience and various other factors that are believed
to be reasonable under the circumstances.
The Group's critical accounting judgments and other key sources of estimation
uncertainty remain the same as those as set out in the Group's Consolidated
Financial Statements for the year ended 31 December 2023.
2. Operating segments
The Group's reportable segments are described below. Following the
completion of the sale of the Red Lion Controls business in April 2024, the
Servomex business reporting moved to form part of the Spectris Scientific
division. The new segmental divisional structure reflects the way the business
is managed as well as the current internal reporting provided to the Chief
Operating Decision Maker (considered to be the Board) on a regular basis to
assist in making decisions on capital allocated to each segment and to assess
performance. The segment results include an allocation of head office
expenses, where the costs are attributable to a segment. Costs of running the
PLC are reported separately as Group costs.
The tables below show restated comparative figures for the reportable
operating segments for the six months ended 30 June 2023 and the year ended 31
December 2023, reflecting the impact of changes the Group made to its
operating segments during the period.
The following summarises the operations in each of the Group's reportable
segments:
· Spectris Scientific provides advanced measurement and materials
characterisation, accelerating innovation and efficiency in R&D and
manufacturing. The operating companies in this segment are Malvern
Panalytical, Particle Measuring Systems and Servomex;
· Spectris Dynamics provides differentiated sensing, data
acquisition, analysis modelling and simulation solutions to help customers
accelerate product development and enhance product performance;
· The Red Lion Controls segment is a high value precision in-line
sensing and monitoring business.
· Group costs consist of the cost of running the PLC.
Information about reportable segments
Spectris Scientific Spectris Dynamics Red Lion Controls Group costs Total
Six months ended 30 June 2024 £m £m £m £m £m
Segment revenues 320.0 249.4 20.3 - 589.7
Inter-segment revenue - - - - -
External revenue 320.0 249.4 20.3 - 589.7
Operating profit 16.4 10.7 3.5 (6.6) 24.0
Share of results of associates (0.5) 0.1 - - (0.4)
Fair value through profit and loss movements on debt investments(1) (4.2)
Profit on disposal of businesses(1) 210.6
Financial income(1) 8.2
Finance costs(1) (2.9)
Profit before tax(1) 235.3
Taxation charge(1) (54.3)
Profit after tax(1) 181.0
1. Not allocated to reportable segments
Spectris Scientific Spectris Dynamics Red Lion Controls Group costs Total
Six months ended 30 June 2023 £m £m £m £m £m
Segment revenues 381.3 264.5 56.9 - 702.7
Inter-segment revenue (0.2) - - - (0.2)
External revenue 381.1 264.5 56.9 - 702.5
Operating profit 53.8 18.3 11.1 (12.7) 70.5
Share of results of associates - 0.1 - - 0.1
Fair value through profit and loss movements on debt investments(1) 0.7
Loss on disposal of businesses(1) (11.0)
Financial income(1) 10.3
Finance costs(1) (2.1)
Profit before tax(1) 68.5
Taxation charge(1) (16.3)
Profit after tax(1) 52.2
1. Not allocated to reportable segments
Spectris Scientific Spectris Dynamics Red Lion Controls Group costs Total
Year ended 31 December 2023 £m £m £m £m £m
Segment revenues 804.8 542.8 101.8 - 1,449.4
Inter-segment revenue (0.2) - - - (0.2)
External revenue 804.6 542.8 101.8 - 1,449.2
Operating profit 140.4 56.1 17.3 (25.2) 188.6
Share of results of associates (0.4) 0.3 - - (0.1)
Fair value through profit and loss movements on debt investments(1) 2.8
Loss on disposal of businesses(1) (12.6)
Financial income(1) 11.0
Finance costs(1) (4.1)
Profit before tax(1) 185.6
Taxation charge(1) (40.2)
Profit after tax(1) 145.4
1. Not allocated to reportable segments
Geographical segments
The Group's operating segments are each located in several geographical
locations and sell to external customers in all parts of the world. No
individual country amounts to more than 3% of revenue by location of customer,
other than those noted below. The following is an analysis of revenue from
continuing operations by geographical destination.
Six months ended 30 June Year ended 31 December
2024 2023 2023
£m £m £m
UK 20.7 28.9 56.1
Germany 60.3 70.8 141.6
France 22.6 23.1 51.1
Rest of Europe 86.4 93.8 197.3
USA 151.7 188.0 377.5
Rest of North America 13.7 19.2 37.1
Japan 30.1 39.8 78.3
China 97.5 116.8 249.8
South Korea 14.5 23.9 52.5
Rest of Asia 65.2 65.5 142.7
Rest of the world 27.0 32.7 65.2
589.7 702.5 1,449.2
3. Financial income and finance costs
Six months ended 30 June Year ended 31 December
2024 2023 2023
Financial income £m £m £m
Interest receivable (4.9) (3.3) (5.3)
Net gain on retranslation of short-term inter-company loan balances (3.3) (7.0) (5.7)
(8.2) (10.3) (11.0)
Six months ended 30 June Year ended 31 December
2024 2023 2023
Finance costs £m £m £m
Interest payable on loans and overdrafts 1.3 0.7 1.4
Unwinding of discount factor on lease liabilities 1.4 1.2 2.4
Net interest cost on pension plan obligations 0.1 0.2 0.3
Unwinding of discount factor on redemption liability 0.1 - -
2.9 2.1 4.1
Net finance credit (5.3) (8.2) (6.9)
4. Taxation
The tax charge for the six months to 30 June 2024 has been calculated using
the effective tax rate which is expected to apply to the Group for the full
year, using tax rates substantively enacted at 30 June 2024. The effective tax
rate applied to adjusted profit before tax for the half year is 23.0% (H1
2023: 22.0%; FY 2023: 21.5%). The effective tax rate has been estimated using
full year projections of adjusted profit before tax by territory and the tax
rates applying in those territories. The tax rates applied to adjusting items
are established on an individual basis for each adjusting item.
A reconciliation of the tax charge on adjusted profit to the actual tax charge
is presented below:
Six months ended 30 June Year ended 31 December
2024 2023 2023
£m £m £m
Tax charge on adjusted profit before tax 14.5 22.7 56.7
Tax credit on amortisation of acquisition-related intangible assets (1.9) (2.4) (4.7)
Tax credit on net transaction-related costs and fair value adjustments (0.8) (0.4) (1.7)
Tax charge/(credit) on profit/(loss) on disposal of businesses 49.2 (0.1) (0.2)
Tax charge on retranslation of short-term inter-company loan balances 0.2 0.5 0.3
Tax credit on configuration and customisation costs carried out by third (5.9) (4.2) (10.8)
parties on material SaaS projects
Tax (credit)/charge on fair value through profit and loss movements on debt (1.0) 0.2 0.6
investments
Total tax charge 54.3 16.3 40.2
The UK legislation to implement the OECD BEPS 'Pillar Two' or 'GloBE' minimum
tax rules was substantively enacted in June 2023. The rules apply to Spectris
from 1 January 2024. We anticipate that these legislative changes will give
rise to limited upward pressure on the Group's adjusted effective tax rate
from FY2024. The expected impact has been factored into the effective tax rate
applied to the Group's profits for H1 2024. The charge is expected to
primarily arise due to the Group receiving tax incentives for innovation under
local laws in certain countries which, in limited circumstances, can reduce
effective tax rates below 15%.
The Group has applied the temporary exception included in IAS 12 'Income
Taxes' from recognising or disclosing information about deferred taxes related
to 'Pillar Two' income taxes. This mandatory temporary exception was included
in the narrow scope amendments to IAS 12 published by the IASB in May 2023.
5. Dividends
Six months ended 30 June Year ended 31 December
2024 2023 2023
Amounts recognised and paid as distributions to owners of the Company in the £m £m £m
period
Final dividend for the year ended 31 December 2023 of 53.9p per share 54.2 - -
Final dividend for the year ended 31 December 2022 of 51.3p per share - 53.7 53.7
Interim dividend for the year ended 31 December 2023 of 25.3p per share - - 26.0
54.2 53.7 79.7
An interim 2024 dividend of 26.6p per share has been declared and will be
payable on 8 November 2024 to ordinary shareholders on the register at the
close of business on 4 October 2024.
6. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the
period attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period (excluding treasury shares).
Diluted profit per share amounts are calculated by dividing the net profit
attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period but adjusted for the effects of
dilutive options. This additional adjustment is not made when there is a net
loss attributable to ordinary shareholders.
Six months ended 30 June Year ended 31 December
Basic earnings per share 2024 2023 2023
Profit after tax (£m) 181.0 52.2 145.4
Non-controlling interest - - -
Profit attributable to ordinary equity holders of the parent for basic 181.0 52.2 145.4
earnings
Weighted average number of shares outstanding (millions) 100.8 104.5 103.6
Basic earnings per share (pence) 179.6 50.0 140.3
Six months ended 30 June Year ended 31 December
Diluted earnings per share 2024 2023 2023
Profit after tax (£m) 181.0 52.2 145.4
Non-controlling interest - - -
Profit attributable to ordinary equity holders of the parent for diluted 181.0 52.2 145.4
earnings
Basic weighted average number of shares outstanding (millions) 100.8 104.5 103.6
Weighted average number of dilutive 5p ordinary shares under option (millions) 0.7 0.7 0.9
Weighted average number of 5p ordinary shares that would have been issued at (0.2) (0.2) (0.2)
average market value from proceeds of dilutive share options (millions)
Diluted weighted average number of shares outstanding (millions) 101.3 105.0 104.3
Diluted earnings per share (pence) 178.7 49.7 139.4
7. Acquisitions
On 25 April 2024, the Group acquired 5.74% of the share capital of Dimer
Instruments Inc (Dimer), together with various rights for a total purchase
consideration of £7.7 million. These rights include a series of call and
put options that trigger when certain developmental milestones are achieved,
this will increase the Group's holding over time to 40.11%. Dimer is an
analytical instruments company, which supports the development of protein
screening technology to assist in drug discovery. The transaction is in line
with Spectris' strategy to make synergistic acquisitions to enhance and grow
its businesses. Dimer will be integrated into the Spectris Scientific
reportable segment and Malvern Panalytical cash generating unit.
The Group has provisionally allocated £6.9 million of deferred consideration
(equal to the total discounted future payments) to the milestone call and put
options. The remaining £0.8 million purchase consideration is primarily
allocable to the 5.74% initial shareholding, together with a call option to
purchase the remaining shareholding at any time in the next seven years at a
pre-set price.
Having evaluated the options and other rights attached to the acquisition, the
Group has concluded that, on balance, they are able to substantively exercise
control over Dimer and as such its results are fully consolidated from the
acquisition date, with a corresponding non-controlling interest (NCI) being
recognised in equity in accordance with IFRS 10. The NCI has been calculated
with reference to the 40.11% in-substance ownership of Dimer at the
acquisition date.
The excess of the provisional fair value of consideration paid over the fair
value of the net assets acquired is represented by goodwill. Goodwill arising
is attributable to the assembled workforce, in process research, expected
future customer relationships and synergies from cross-selling goods and
services.
The call option to purchase the remaining share capital of Dimer and the right
of first refusal if a third party makes an offer to acquire some or all of
Dimer's other shareholders equity have been provisionally assessed to have an
immaterial value.
Dimer did not contribute to the Group's revenue and operating loss for the six
months ended 30 June 2024. Group revenue and statutory operating profit for
the six months ended 30 June 2024 would be the same had this acquisition taken
place on the first day of the financial period.
Acquisition-related costs (included in administrative expenses) amount to
£0.2 million.
The accounting has only been provisionally determined at 30 June 2024, with
amounts recognised in respect of the estimated fair value of identifiable
assets acquired and liabilities assumed in respect of this acquisition
provided below:
30 June
2024
£m
Other receivables 0.8
Trade and other payables (0.1)
Net assets acquired 0.7
Non-controlling interest measured at provisional fair value (0.4)
Provisional Goodwill 7.4
Gross consideration 7.7
Analysis of cash outflow in Condensed Consolidated Statement of Cash Flows
Gross consideration in respect of acquisitions during the period 7.7
Deferred and contingent consideration on acquisitions included in net (6.9)
consideration during the period to be paid in future periods
Cash paid during the year in respect of acquisitions during the period 0.8
Cash paid in respect of prior periods' acquisitions -
Net cash outflow relating to acquisitions 0.8
8. Business disposals
On 3 April 2024, the Group disposed of its Red Lion Controls business, which
formed the Red Lion Controls operating segment. The consideration received was
£280.9 million, settled in cash. This generated a pre-tax profit on disposal
of £210.9 million. The divestment was effected to offer a better opportunity
to generate returns for shareholders and further enhance Group margins.
The profit on disposal of the Red Lion Controls business was calculated as
follows:
30 June
2024
£m
Goodwill 46.5
Other intangible assets 8.9
Property, plant and equipment - owned and right of use assets 9.4
Current tax assets 0.1
Inventories 22.0
Trade and other receivables 10.8
Cash and cash equivalents 2.0
Trade and other payables (8.3)
Lease liabilities (0.6)
Provisions (0.8)
Deferred tax liabilities (6.5)
Net assets of disposed businesses 83.5
Consideration received
Settled in cash 280.9
Total consideration received 280.9
Transaction expenses booked to profit on disposal of business (4.4)
Net consideration from disposal of business 276.5
Net assets disposed of (including cash and cash equivalents held by disposal (83.5)
group)
Currency translation differences transferred from translation reserve 17.9
Pre-tax profit on disposal of business 210.9
Net proceeds recognised in the Condensed Consolidated Statement of Cash Flows
Consideration received settled in cash 280.9
Cash and cash equivalents held by disposed business (2.0)
Transaction fees paid (4.4)
Tax paid on current period disposal of business (25.2)
Net proceeds recognised in the Condensed Consolidated Statement of Cash Flows 249.3
in respect of current period disposal
Payment made in respect of prior year's disposals of businesses (0.5)
Net proceeds recognised in the Condensed Consolidated Statement of Cash Flows 248.8
Also included in profit on disposal of business in the Condensed Consolidated
Income Statement is £0.3m of transaction costs relating to prior year
disposals.
9. Cash generated from operations
Six months ended 30 June Year ended 31 December
2024 2023 2023
Note £m £m £m
Cash flows from operating activities
Profit after tax 181.0 52.2 145.4
Adjustments for:
Taxation charge 54.3 16.3 40.2
Share of post-tax results of associates 0.4 (0.1) 0.1
(Profit)/loss on disposal of businesses 8 (210.6) 11.0 12.6
Finance costs 3 2.9 2.1 4.1
Financial income 3 (8.2) (10.3) (11.0)
Depreciation and impairment of property, plant and equipment 15.5 16.6 32.8
Amortisation, impairment and other non-cash adjustments made of intangible 9.9 12.8 24.9
assets
Transaction-related fair value adjustments 0.2 1.7 7.5
Fair value through profit and loss movements on debt investments 4.2 (0.7) (2.8)
Profit on disposal and re-measurement of property, plant and equipment and (0.1) (0.7) (0.5)
associated lease liabilities
Equity-settled share-based payment expense 6.3 7.4 13.1
Operating cash flow before changes in working capital and provisions 55.8 108.3 266.4
Decrease in trade and other receivables 25.6 24.9 16.0
(Increase)/decrease in inventories (6.9) (9.5) 1.5
Decrease in trade and other payables (15.2) (12.1) (33.0)
Decrease in provisions and retirement benefits (1.9) (2.7) (5.4)
Cash generated from operations 57.4 108.9 245.5
10. Share buyback, treasury shares and employee benefit trust shares
During the six months ended 30 June 2024, 1,313,979 ordinary shares were
repurchased and cancelled by the Group as part of the first tranche of the
£150 million share buyback programme announced on 11 December 2023, resulting
in a cash outflow of £46.0 million, including transaction fees of £0.2
million.
During the six months ended 30 June 2023, 729,423 ordinary shares were
repurchased and cancelled by the Group as part of the £300 million share
buyback programme announced on 19 April 2022, resulting in a cash outflow of
£26.7 million, including transaction fees of £0.1 million.
At 30 June 2024, the Group held 3,806,195 treasury shares (H1 2023: 4,205,234;
FY 2023: 4,128,036). During the period, 321,841 (H1 2023: 390,662; FY 2023:
468,662) of these shares were issued to satisfy options exercised by, and SIP
Matching Shares awarded to, employees which were granted under the Group's
share schemes.
11. Financial instruments
The following tables show the fair value measurement of financial instruments
by level following the fair value hierarchy:
· Level 1: quoted listed stock exchange prices (unadjusted) in
active markets for identical assets;
· Level 2: inputs other than quoted prices within level 1 that are
observable for the asset or liability, either directly (i.e., as prices) or
indirectly (i.e. derived from prices); and
· Level 3: inputs for assets and liabilities derived from valuation
techniques that include inputs for the assets or liability that are not based
on observable market data.
The fair value measurement methodology of all financial instruments remains
consistent with the approach disclosed in the Consolidated Financial
Statements for the year ended 31 December 2023.
Level 1 fair value Level 2 fair value Level 3 fair value Carrying amount
Six months ended 30 June 2024 £m £m £m £m
Fair value hierarchy categorisation of financial instruments measured at fair
value
Deferred and contingent consideration receivable on acquisitions - - 0.5 0.5
Deferred and contingent consideration payable on acquisitions - - (17.7) (17.7)
Investment in equity instruments designated at initial recognition at fair 0.3 - 23.2 23.5
value through other comprehensive income
Investment in debt instruments - - 17.5 17.5
Cash and cash equivalents - 292.5 - 292.5
Forward exchange contract assets - 4.1 - 4.1
Forward exchange contract liabilities - (0.7) - (0.7)
319.7
Level 1 fair value Level 2 fair value Level 3 fair value Carrying amount
Six months ended 30 June 2023 £m £m £m £m
Fair value hierarchy categorisation of financial instruments measured at fair
value
Deferred and contingent consideration payable on acquisitions - - (2.2) (2.2)
Investment in equity instruments designated at initial recognition at fair 0.5 - 25.8 26.3
value through other comprehensive income
Investment in debt instruments - - 19.6 19.6
Cash and cash equivalents - 214.3 - 214.3
Forward exchange contract assets - 7.0 - 7.0
Forward exchange contract liabilities - (0.3) - (0.3)
264.7
Level 1 fair value Level 2 fair value Level 3 fair value Carrying amount
Year ended 31 December 2023 £m £m £m £m
Fair value hierarchy categorisation of financial instruments measured at fair
value
Deferred and contingent consideration receivable on acquisitions - - 0.5 0.5
Deferred and contingent consideration payable on acquisitions - - (10.6) (10.6)
Investment in equity instruments designated at initial recognition at fair 0.4 - 23.9 24.3
value through other comprehensive income
Investment in debt instruments - - 21.7 21.7
Cash and cash equivalents included in assets held for sale - 0.3 - 0.3
Cash and cash equivalents - 138.5 - 138.5
Forward exchange contract assets - 6.2 - 6.2
Forward exchange contract liabilities included in assets held for sale - (0.1) - (0.1)
Forward exchange contract liabilities - (0.1) - (0.1)
180.7
There were no movements between the different levels of the fair value
hierarchy in the period.
The fair value of floating rate borrowings approximates to the carrying amount
because interest rates are at floating rates where payments are reset to
market rates at intervals of less than one year.
The fair value of fixed rate borrowings is estimated by discounting the future
contracted cash flow, using appropriate yield curves, to the net present
values.
The level 1 £0.3 million (H1 2023: £0.5 million, FY 2023: £0.4 million) of
investments in equity instruments is calculated using quoted market prices in
an active market at the balance sheet date.
The level 2 fair value of forward exchange contracts is determined using
discounted cash flow techniques based on readily available market data.
The level 2 and level 3 fair value of cash and cash equivalents approximates
to the carrying amount because of the short maturity of these instruments.
The level 3 fair value of deferred and contingent consideration is determined
by considering the performance expectations of the acquired or disposed entity
or the likelihood of non-financial integration milestones whilst applying the
entity-specific discount rates. The unobservable inputs are the projected
forecast measures that are assessed on an annual basis. Changes in the fair
value of deferred and contingent consideration relating to updated projected
forecast performance measures are recognised in the Condensed Consolidated
Income Statement within administrative expenses in the Condensed Consolidated
Income Statement in the period that the change occurs.
Six months ended 30 June Year ended 31 December
2024 2023 2023
£m £m £m
Reconciliation of level 3 fair value for deferred and contingent consideration
payable on acquisitions
At 1 January (10.1) (3.3) (3.3)
Deferred and contingent consideration arising from current period acquisitions (6.9) - (3.0)
payable in future periods
Deferred and contingent consideration arising from current period acquisitions - - 0.5
receivable in future periods
Deferred and contingent consideration paid in the current period relating to - 2.8 1.9
previous periods' acquisitions
Deferred and contingent consideration transferred to liabilities held for sale - - 1.3
Costs charged to the Condensed Consolidated Income Statement:
Subsequent adjustment on acquisitions and disposals (0.2) (1.7) (7.5)
At end of period (17.2) (2.2) (10.1)
The level 3 £23.2 million (H1 2023: £27.4 million, FY 2023: £23.9 million)
of investment in equity instruments consists of the investment units in EZ
Ring FPCI, the fund holding the combined UTAC-Millbrook group. This investment
is recognised at fair value, using the income approach, with the key input
being a discounted cash flow. A 1% to 5% decrease in net asset value per share
would cause a £0.2 million to £1.2 million decrease in the fair value.
Six months ended 30 June Year ended 31 December
2024 2023 2023
£m £m £m
Reconciliation of level 3 fair value for investment in equity instruments
At 1 January 23.9 28.6 28.6
Fair value loss (0.1) (2.0) (4.2)
Foreign exchange difference (0.6) (0.8) (0.5)
At end of period 23.2 25.8 23.9
The level 3 £17.5 million (H1 2023: £19.6 million, FY 2023: £21.7 million)
of investment in debt instruments consists of a vendor loan note receivable.
This investment is recognised at fair value by establishing an appropriate
market yield. The key inputs used were synthetic credit ratings and market
interest rates. The Group has performed sensitivity analysis of reasonable
possible changes in key inputs. A 1% decrease in market interest rates would
cause a £0.5 million increase in the fair value and 1% increase would cause a
£0.5 million decrease in the fair value.
Six months ended 30 June Year ended 31 December
2024 2023 2023
£m £m £m
Reconciliation of level 3 fair value for investment in debt instruments
At 1 January 21.7 18.9 18.9
Fair value movement on level 3 investment in debt instruments (4.2) 0.7 2.8
At end of period 17.5 19.6 21.7
12. Post balance sheet events
On 4 July 2024, the Group announced that it had agreed to acquire SciAps
Incorporated (SciAps) for headline consideration of up to $260 million (£205
million), comprising up-front consideration of $200 million (£157 million)
plus a deferred element of up to $60 million (£47 million) payable on the
delivery of agreed financial metrics. This amount is subject to potential
adjustment through a completion accounts process. The transaction is in line
with Spectris' strategy to make synergistic acquisitions to enhance and grow
its platform and potential platform businesses. SciAps will be integrated into
the Spectris Scientific reportable segment.
On 16 July 2024, the Group announced that it had agreed to acquire
Micromeritics Instrument Corporation (Micromeritics) for headline
consideration of up to $683 million (£526 million), comprising up-front
consideration of $630 million (£485 million) plus a deferred element of up to
$53 million (£41 million) based on agreed financial performance metrics in
2024 and 2025. The transaction is in line with Spectris' strategy to make
synergistic acquisitions to enhance and grow its platform and potential
platform businesses. Micromeritics will be integrated into the Spectris
Scientific reportable segment.
The Group has sourced sufficient bridge financing and is working with lenders
to finalise terms on long term financing.
These acquisitions are expected to complete in the third quarter.
Appendix - Alternative performance measures
Policy
Spectris uses adjusted and underlying figures as key performance measures in
addition to those reported under IFRS, as management believe these measures
enable management and stakeholders to assess the underlying performance of the
businesses as they exclude certain items that are considered to be significant
in nature or quantum, foreign exchange movements and the impact of
acquisitions and disposals.
The alternative performance measures (APMs) are consistent with how the
businesses' performance is planned and reported within the internal management
reporting to the Board and Operating Committees. Some of these measures are
used for the purpose of setting remuneration targets. The key APMs that the
Group uses include like-for-like (LFL) organic performance measures and
adjusted measures for the income statement together with adjusted financial
position and cash flow measures. Explanations of how they are calculated and
how they are reconciled to an IFRS statutory measure are set out below.
Adjusted measures
The Group's policy is to exclude items that are considered to be significant
in nature or quantum and where treatment as an adjusted item provides
stakeholders with additional useful information to better assess the
period-on-period trading performance of the Group.
Some of these items are material in nature and the costs are expected to be
incurred over more than one reporting period.
The Group excludes such items which management have defined for 2024 and 2023
as:
Amortisation of acquisition-related intangible assets Nature
Depreciation of acquisition-related fair value adjustments to property, plant Nature
and equipment
Transaction-related costs, deferred and contingent consideration fair value Nature
adjustments
Spectris Foundation contribution(1) Nature
Configuration and customisation costs carried out by third parties on material Quantum
SaaS projects(1)
Profits or losses on termination or disposal of businesses Nature
Unrealised changes in the fair value of financial instruments Nature
Fair value through profit and loss movements on debt investments Nature
Gains or losses on retranslation of short-term inter-company loan balances Nature
Related tax effects on the above and other tax items which do not form part of Dependent on above classification
the underlying tax rate
(1) Multi-year project, where the cost is expected to continue beyond the
current reporting period.
LFL measures
Reference is made to LFL and organic measures throughout this document. LFL
and organic have the same definition, as set out below.
The Board reviews and compares current and prior period segmental sales and
adjusted operating profit at constant exchange rates and excludes the impact
of acquisitions and disposals during the period
The constant exchange rate comparison uses the current period segmental
information, stated in each entity's functional currency, and translates the
results into its presentation currency using the prior period's monthly
exchange rates, irrespective of the underlying transactional currency.
The incremental impact of business acquisitions is excluded for the first
twelve months of ownership from the month of purchase. For business disposals,
comparative figures for segmental sales and adjusted gross profit, overheads
and operating profit (adjusted results) are adjusted to reflect the comparable
periods of ownership.
On 1 April 2024, the Red Lion Controls business was disposed of and, as a
result, the segmental LFL adjusted results for the Red Lion Controls segment
for 2023 exclude the trading results of the Red Lion Controls business for the
period from April 2023 to June 2023.
On 31 March 2023, the Concept Life Sciences business was disposed of and, as a
result, the segmental LFL adjusted results for the Spectris Scientific segment
for 2023 exclude the trading results of the Concept Life Sciences business for
the period from January 2023 to March 2023.
The tables on the following pages show restated comparative figures for the
reportable operating segments for the six months ended 30 June 2023 and the
year ended 31 December 2023, reflecting the impact of changes the Group made
following the completion of the sale of the Red Lion Controls business in
April 2024, the Servomex business reporting moved to form part of the Spectris
Scientific division.
The LFL measure is presented as a means of eliminating the effects of exchange
rate fluctuations on the period-on-period statutory results as well as
allowing the Board to assess the underlying trading performance of the
businesses on a LFL basis for sales, gross profit, overheads and operating
profit.
Based on the above policy, the adjusted performance measures are derived from
the statutory figures as follows:
Income statement measures
a) LFL adjusted sales by segment
H1 2024 LFL adjusted sales versus H1 2023 LFL adjusted sales
Spectris Scientific Spectris Dynamics Red Lion Controls H1 2024 Total
Six months ended 30 June 2024 sales by segment £m £m £m £m
Sales 320.0 249.4 20.3 589.7
Constant exchange rate adjustment to H1 2023 exchange rates 11.8 8.8 0.9 21.5
Acquisitions (1.6) (6.6) - (8.2)
LFL adjusted sales 330.2 251.6 21.2 603.0
Spectris Scientific Spectris Dynamics Red Lion Controls H1 2023 Total
Six months ended 30 June 2023 sales by segment £m £m £m £m
Sales 381.1 264.5 56.9 702.5
Disposal of businesses (5.5) - (27.4) (32.9)
LFL adjusted sales 375.6 264.5 29.5 669.6
b) Adjusted operating profit and adjusted operating margin
H1 2024 LFL adjusted operating profit versus H1 2023 LFL adjusted operating
profit
Six months ended 30 June 2024 adjusted operating profit Spectris Scientific Spectris Dynamics Red Lion Controls Group costs H1 2024 Total
£m £m £m £m £m
Statutory operating profit 16.4 10.7 3.5 (6.6) 24.0
Net transaction-related costs and fair value adjustments 5.5 1.7 0.2 - 7.4
Configuration and customisation costs carried out by third parties on material 8.9 13.1 - - 22.0
SaaS projects
Amortisation of acquisition-related intangible assets 2.6 5.1 - - 7.7
Adjusted operating profit 33.4 30.6 3.7 (6.6) 61.1
Constant exchange rate adjustment to H1 2023 exchange rates 0.3 1.0 0.2 - 1.5
Acquisitions (0.1) 0.3 - - 0.2
LFL adjusted operating profit 33.6 31.9 3.9 (6.6) 62.8
Spectris Scientific Spectris Dynamics Red Lion Controls Group costs H1 2023 Total
Six months ended 30 June 2023 adjusted operating profit
£m £m £m £m £m
Statutory operating profit 53.8 18.3 11.1 (12.7) 70.5
Net transaction-related costs and fair value adjustments 0.6 1.6 1.8 - 4.0
Configuration and customisation costs carried out by third parties on material 8.6 9.2 - - 17.8
SaaS projects
Amortisation of acquisition-related intangible assets 2.7 6.7 0.4 - 9.8
Adjusted operating profit 65.7 35.8 13.3 (12.7) 102.1
Disposal of businesses 0.5 - (6.1) - (5.6)
LFL adjusted operating profit 66.2 35.8 7.2 (12.7) 96.5
Year ended 31 December 2023 adjusted operating profit Spectris Scientific Spectris Dynamics Red Lion Controls Group costs 2023 Total
£m £m £m £m £m
Statutory operating profit 140.4 56.1 17.3 (25.2) 188.6
Net transaction-related costs and fair value adjustments 7.1 3.1 3.8 - 14.0
Spectris Foundation Contribution - - - 1.0 1.0
Configuration and customisation costs carried out by third parties on material 19.4 20.6 - - 40.0
SaaS projects
Amortisation of acquisition-related intangible assets 5.0 13.2 0.7 - 18.9
Adjusted operating profit 171.9 93.0 21.8 (24.2) 262.5
Spectris Scientific Spectris Dynamics Red Lion Controls H1 2024 Total
Six months ended 30 June 2024 operating margin % % % %
Statutory operating margin(1) 5.1 4.3 17.2 4.1
Adjusted operating margin(2) 10.4 12.3 18.2 10.4
LFL adjusted operating margin(3) 10.2 12.7 18.4 10.4
Spectris Scientific Spectris Dynamics Red Lion Controls H1 2023 Total
Six months ended 30 June 2023 operating margin % % % %
Statutory operating margin(1) 14.1 6.9 19.5 10.0
Adjusted operating margin(2) 17.2 13.5 23.4 14.5
LFL adjusted operating margin(3) 17.6 13.5 24.4 14.4
Spectris Scientific Spectris Dynamics Red Lion Controls 2023 Total
Year ended 31 December 2023 operating margin % % % %
Statutory operating margin(1) 17.4 10.3 17.0 13.0
Adjusted operating margin(2) 21.4 17.1 21.4 18.1
1. Statutory operating margin is calculated as statutory operating
profit divided by sales
2. Adjusted operating margin is calculated as adjusted operating
profit divided by sales
3. LFL adjusted operating margin is calculated as LFL adjusted
operating profit divided by LFL adjusted sales. Refer to the tables above for
a reconciliation of the nearest GAAP measure (sales/operating profit
respectively) to LFL adjusted sales/LFL adjusted operating profit.
c) Adjusted gross profit and adjusted gross margin
H1 2024 LFL adjusted gross profit versus H1 2023 LFL adjusted gross profit
H1 2024
Total
Six months ended 30 June 2024 adjusted gross profit £m
Statutory gross profit 324.0
Constant exchange rate adjustment to H1 2023 exchange rates 9.3
Acquisitions (3.4)
LFL adjusted gross profit 329.9
H1 2023
Total
Six months ended 30 June 2023 LFL adjusted gross profit £m
Statutory gross profit 400.5
Disposal of businesses (17.4)
LFL adjusted gross profit 383.1
H1 2024
Total
Six months ended 30 June 2024 gross margin %
Statutory gross margin(1) 54.9
LFL adjusted gross margin(2) 54.7
H1 2023
Total
Six months ended 30 June 2023 gross margin %
Statutory gross margin(1) 57.0
LFL adjusted gross margin(2) 57.2
1. Statutory gross margin is calculated as statutory gross profit
divided by sales
2. LFL adjusted gross margin is calculated as LFL adjusted gross
profit divided by LFL adjusted sales. Refer to the tables above for a
reconciliation of the nearest GAAP measure (sales/gross profit respectively)
to LFL adjusted sales/LFL adjusted gross profit.
d) LFL Adjusted overheads
H1 2024 Total
Six months ended 30 June 2024 LFL adjusted overheads £m
Statutory indirect production and engineering expenses (59.5)
Statutory sales and marketing expenses (115.1)
Statutory administrative expenses (125.4)
Total overheads (300.0)
Net transaction-related costs and fair value adjustments 7.4
Configuration and customisation costs carried out by third parties on material 22.0
SaaS projects
Amortisation of acquisition-related intangible assets 7.7
Constant exchange rate adjustment to H1 2023 exchange rates (7.8)
Acquisitions 3.6
LFL adjusted overheads (267.1)
H1 2023 Total
Six months ended 30 June 2023 LFL adjusted overheads £m
Statutory indirect production and engineering expenses (63.0)
Statutory sales and marketing expenses (129.0)
Statutory administrative expenses (138.0)
Total overheads (330.0)
Net transaction-related costs and fair value adjustments 4.0
Configuration and customisation costs carried out by third parties on material 17.8
SaaS projects
Amortisation of acquisition-related intangible assets 9.8
Disposal of businesses 11.8
LFL adjusted overheads (286.6)
H1 2024 Total
Six months ended 30 June 2024 LFL adjusted overheads as a percentage of sales %
LFL adjusted overheads as a percentage of sales(1) 44.3
H1 2023 Total
Six months ended 30 June 2023 LFL adjusted overheads as a percentage of sales %
LFL adjusted overheads as a percentage of sales(1) 42.8
1. LFL overheads as a percentage of sales is calculated as LFL
adjusted overheads divided by LFL adjusted sales. Refer to the tables above
for a reconciliation of the nearest GAAP measure (sales/total overheads
respectively) to LFL adjusted sales/LFL adjusted overheads.
e) Adjusted net finance credit
Six months ended 30 June Year ended 31 December
2024 2023 2023
£m £m £m
Statutory net finance credit 5.3 8.2 6.9
Net gain on retranslation of short-term inter-company loan balances (3.2) (7.0) (5.7)
Adjusted net finance credit 2.1 1.2 1.2
f) Adjusted profit before taxation
Six months ended 30 June Year ended 31 December
2024 2023 2023
£m £m £m
Adjusted operating profit 61.1 102.1 262.5
Share of post-tax results of associates (0.4) 0.1 (0.1)
Adjusted net finance credit 2.1 1.2 1.2
Adjusted profit before taxation 62.8 103.4 263.6
g) Adjusted earnings per share
Six months ended 30 June Year ended 31 December
2024 2023 2023
Adjusted earnings £m £m £m
Statutory profit after tax 181.0 52.2 145.4
Adjusted for:
Net transaction-related costs and fair value adjustments 7.4 4.0 14.0
Spectris Foundation Contribution - - 1.0
Configuration and customisation costs carried out by third parties on material 22.0 17.8 40.0
SaaS projects
Amortisation of acquisition-related intangible assets 7.7 9.8 18.9
Fair value through profit and loss movements on debt investments 4.2 (0.7) (2.8)
(Profit)/loss on disposal of businesses (210.6) 11.0 12.6
Net gain on retranslation of short-term inter-company loan balances (3.2) (7.0) (5.7)
Tax effect of the above and other non-recurring items 39.8 (6.4) (16.5)
Adjusted earnings 48.3 80.7 206.9
Six months ended 30 June Year ended 31 December
2024 2023 2023
Adjusted earnings per share £m £m £m
Weighted average number of shares outstanding (millions) 100.8 104.5 103.6
Adjusted earnings per share (pence) 47.9 77.2 199.7
Basic earnings per share in accordance with IAS 33 'Earnings Per Share' are
disclosed in note 6.
Financial position measures
h) Net cash
Six months ended 30 June Year ended 31 December
2024 2023 2023
£m £m £m
Cash and cash equivalents included in current assets 292.5 214.3 138.5
Cash and cash equivalents included in assets held for sale - - 0.3
Net cash 292.5 214.3 138.8
Net cash excludes lease liabilities arising under IFRS 16 as this aligns with
the definition of net cash under the Group's bank covenants.
Six months ended 30 June Year ended 31 December
Reconciliation of changes in cash and cash equivalents to movements in net 2024 2023 2023
cash
£m £m £m
Net increase/(decrease) in cash and cash equivalents 158.6 (7.8) (85.7)
Repayment of borrowings - 0.1 0.1
Effect of foreign exchange rate changes (4.9) (6.0) (3.6)
Movement in net cash 153.7 (13.7) (89.2)
Net cash at beginning of period 138.8 228.0 228.0
Net cash at end of period 292.5 214.3 138.8
Cash flow measures
i) Adjusted cash flow
Six months ended 30 June Year ended 31 December
2024 2023 2023
£m £m £m
Cash generated from operations 57.4 108.9 245.5
Net income taxes paid (26.8) (30.0) (50.3)
Net cash inflow from operating activities 30.6 78.9 195.2
Transaction-related costs paid 2.8 1.0 5.8
Spectris Foundation Contribution paid 1.0 - -
Restructuring cash outflow 0.1 0.8 1.4
Net income taxes paid 26.8 30.0 50.3
Purchase of property, plant and equipment and intangible assets (15.8) (11.7) (24.7)
SaaS-related cash expenditure 22.0 17.8 40.0
Proceeds from disposal of property, plant and equipment and software 0.4 2.9 3.1
Adjusted cash flow 67.9 119.7 271.1
Adjusted cash flow conversion(1) 111% 117% 103%
1. Adjusted cash flow conversion is calculated as adjusted cash flow
as a proportion of adjusted operating profit.
Other measures
j) Return on gross capital employed ('ROGCE')
The ROGCE is calculated as adjusted operating profit for the last 12 months
divided by the average of opening and closing gross capital employed. Gross
capital employed is calculated as net assets excluding net cash and excluding
accumulated amortisation and impairment of acquisition-related intangible
assets including goodwill.
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Net cash (see APM h) (292.5) (214.3) (138.8)
Accumulated impairment losses on goodwill including items transferred to 39.5 40.1 40.6
assets held for sale
Accumulated amortisation and impairment of acquisition-related intangible 155.9 140.5 149.9
assets including items transferred to assets held for sale
Shareholders equity 1,408.2 1,355.4 1,315.9
Gross capital employed 1,311.1 1,321.7 1,367.6
Average gross capital employed (current and prior period)(1) 1,316.4 1,508.4
Adjusted operating profit for six months to June 2024 and 2023 61.1 102.1
Adjusted operating profit for six months to December 2023 and 2022 160.4 150.1
Total adjusted operating profit for last 12 months 221.5 252.2
Return on gross capital employed 16.8% 16.7%
1. Average gross capital employed is calculated as current period
gross capital employed divided by comparative period gross capital employed.
k) Net transaction-related costs and fair value adjustments
Net transaction-related costs and fair value adjustments comprise transaction
costs of £7.2 million
(H1 2023: £2.3 million; FY 2023: £6.5 million) that have been recognised in
the Condensed Consolidated Income Statement under IFRS 3 (Revised) 'Business
Combinations' and other fair value adjustments relating to deferred and
contingent consideration comprising a charge of £0.2 million (H1 2023: charge
of £1.7 million; FY 2023: charge of £7.5 million).
Net transaction-related costs and fair value adjustments are included within
administrative expenses. Transaction-related costs have been excluded from the
adjusted operating profit and transaction costs paid of £2.8 million (H1
2023: £1.0 million; FY 2023: £5.8 million) have been excluded from the
adjusted cash flow.
l) Order intake, order book and book-to-bill
Order intake is defined as the monetary value of contractual commitments
towards future product fulfilment recorded within the financial period. The
order book is defined as the volume of outstanding contractual commitments for
future product fulfilment measured at period end. Book-to-bill is defined as
the ratio of order intake to sales within the financial period. These
measures cannot be reconciled because they do not derive from the Condensed
Consolidated Financial Statements and are presented because they are
indicative of potential future revenues.
Responsibility statement of the Directors in respect of the Interim report
We confirm that to the best of our knowledge:
a) the condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting' and give a true and fair
view of the undertakings included in the consolidation as a whole, as required
by DTR 4.2.4R;
b) the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events and their impact during
the first six months and description of the principal risks and uncertainties
for the remaining six months of the year); and
c) the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related party transactions and changes
therein).
By order of the Board
Andrew
Heath
Derek Harding
Chief Executive
Chief Financial Officer
29 July 2024
Independent review report to Spectris plc
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2024 which comprises the Condensed Consolidated Income Statement, the
Condensed Consolidated Statement of Comprehensive Income, the Condensed
Consolidated Statement of Changes in Equity, the Condensed Consolidated
Statement of Financial Position, the Condensed Consolidated Statement of Cash
Flows, and the related notes 1 to 12.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2024 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the company a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
29 July 2024
Dividend timetable - H1 2024 interim dividend
Event Date - 2024
Ex-dividend date 3 October 2024
Record date 4 October 2024
Payment date 8 November 2024
Cautionary statement
This press release may contain forward-looking statements. These statements
can be identified by the fact that they do not relate only to historical or
current facts. Without limitation, forward-looking statements often use words
such as anticipate, target, expect, estimate, intend, plan, goal, believe,
will, may, should, would, could or other words of similar meaning. These
statements may (without limitation) relate to the Company's financial
position, business strategy, plans for future operations or market trends. No
assurance can be given that any particular expectation will be met or proved
accurate and shareholders are cautioned not to place undue reliance on such
statements because, by their very nature, they may be affected by a number of
known and unknown risks, uncertainties and other important factors which could
cause actual results to differ materially from those currently anticipated.
Any forward-looking statement is made on the basis of information available to
Spectris plc as of the date of the preparation of this press release. All
forward-looking statements contained in this press release are qualified by
the cautionary statements contained in this section. Other than in accordance
with its legal and regulatory obligations, Spectris plc disclaims any
obligation to update or revise any forward-looking statement contained in this
press release to reflect any change in circumstances or its expectations.
1 (#_ftnref1) Current consensus expectations for adjusted operating profit:
£218.5 million to £231.5 million with average of £225.1 million
2 (#_ftnref2) Current consensus expectations for adjusted operating profit:
£218.5 million to £231.5 million with average of £225.1 million.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR EANXNAFPLEFARecent news on Spectris
See all newsREG - Spectris PLC - Total Voting Rights
AnnouncementREG - Spectris PLC - Q1 Trading Update
AnnouncementREG - Spectris PLC - Director/PDMR Shareholding
AnnouncementREG - Spectris PLC - Director/PDMR Shareholding
AnnouncementREG - Spectris PLC - Total Voting Rights
Announcement