Trading Update

TRADING UPDATE

20 November 2018 – Spectris plc (SXS: LSE), the productivity-enhancing instrumentation and controls company, issues this trading update covering the period from 1 July to 31 October 2018 (‘the period’).

HIGHLIGHTS

• Strong trading in the period with 8% like-for-like¹ sales growth
• Full-year 2018 performance anticipated to be in line with our expectations
• Project Uplift Phase 1 on track; decision taken not to proceed with global shared services centre
• Further cost reduction programme commenced – more disciplined approach to improve operating margins
• Strategic review initiated – focused on asset optimisation, capital allocation and portfolio composition

TRADING

Reported sales in the period increased 9% compared to the corresponding period in the previous year. Group like-for-like¹ (‘LFL’) sales increased 8%, whilst acquisitions, net of disposals, contributed 2% to sales growth and foreign currency movements had a negative 1% impact. For the ten-month period from 1 January to 31 October, LFL sales rose 6% and reported sales increased 5%.

 

LFL sales grew in all regions during the period with particularly good growth in Asia, led by strong demand in China and Japan. The performance in North America was similar to that in the first half of the year, while growth in Europe moderated from the first half, though growth in orders improved.

In our end markets, there was notable LFL sales growth to pharmaceutical, automotive and semiconductor customers, as well as academic research, which recovered from a weak first half.

LFL sales increased across all four of the Group’s business segments, particularly in the Materials Analysis segment, driven by the strong growth in the pharmaceutical and semiconductor industries. LFL sales growth in Test and Measurement was similar to the first half. After a tough comparator in the first half, In-line Instrumentation posted 8% growth, with notably strong demand in Asia. Industrial Controls saw growth moderate in the period, though the order book remains robust.

Performance at Concept Life Sciences, which was acquired in January, has been below expectations and remedial action is being taken to improve operational effectiveness. Stronger growth at the other two operating companies in the Materials Analysis segment has more than offset the shortfall in expected profitability

SHARE BUYBACK

During the period, the Group completed its £100 million share buyback programme.

PROJECT UPLIFT

Phase 1 of Project Uplift is on track to deliver the expected benefits, as previously disclosed. The study on the shared services centre project has now been completed and a decision has been taken not to proceed with a global shared services centre model, given the cost of implementation versus the speed of returns. Instead, we will be implementing a more comprehensive cost reduction programme in 2019.

OUTLOOK

We expect full-year adjusted operating profit to be in line with our expectations.

Andrew Heath, Chief Executive, said:

“Since becoming Chief Executive at the end of September, I have visited the key locations and regions for each of our 14 operating companies, meeting the leadership teams and many of our people in the process. I am pleased by what I have seen.

“Spectris serves a diverse set of end markets with a number of high-quality businesses which have strongly-recognised brands in the target market segments they serve. It is clear we have high-quality technologies, strong market positions and customer relationships, as well as talented people. The Group has good cash flow generation and a robust balance sheet, and we will continue to reinforce and build on these strengths in our businesses. It is pleasing that we have continued to deliver good organic growth in the period.

“However, there are significant opportunities to improve the operational performance of the Group by taking a more focused approach. There are a number of self-help measures we can undertake. We have strong gross margin businesses, but our operating margin performance remains below both historic highs and that of our peers. Consequently, we are commencing a cost reduction programme across the Group to be more efficient in delivering greater operational gearing in 2019 and beyond.

“In addition, we need a sharper focus on asset optimisation, capital allocation discipline and portfolio composition. We have therefore commenced a strategic review, which will explore the potential to reduce complexity and establish a more focused organisation targeting higher growth markets where we have a competitive advantage. The explicit objective is to develop and execute our strategy for profitable growth, as the basis for delivering a significant and sustainable increase in shareholder value.

“I am excited to join the Group at this time and help deliver on the clear potential that exists to drive enhanced shareholder value. I look forward to discussing the future of Spectris and giving greater detail around our strategic and cost initiatives at our full-year results in February 2019.”

CONFERENCE CALL

A conference call for analysts and investors will be hosted by Andrew Heath and Clive Watson,
Group Finance Director, at 08.00 today to discuss this statement.

To access the call, please dial: +44 (0) 333 300 0804, toll free 0800 358 9473 – Pin code: 83325738#.
Or for replay, please dial +44 (0) 333 300 0819, toll free 0800 358 2049 – Pin code: 301259014#.

¹ At constant exchange rates, and including the impact of acquisitions and disposals on a comparable basis

 

– ENDS –

Contacts:

Spectris plc
Andrew Heath, Chief Executive
+44 1784 470470

Clive Watson, Group Finance Director
+44 1784 470470

Siobhán Andrews, Head of Corporate Affairs
+44 1784 485325

FTI Consulting
Richard Mountain / Susanne Yule
+44 203 727 1374

ABOUT SPECTRIS

Spectris plc is a leading supplier of productivity-enhancing instrumentation and controls. The Company’s products, technologies and services help customers to improve product quality and performance, improve core manufacturing processes, reduce downtime and wastage and reduce time to market. Its global customer base spans a diverse range of end-user markets. Spectris operates across four business segments which reflect the applications and industries it serves: Materials Analysis, Test and Measurement, In-line Instrumentation and Industrial Controls. Headquartered in Egham, Surrey, United Kingdom, the Company employs approximately 10,000 people located in more than 30 countries. For more information, visit www.spectris.com.