Spectris plc, the productivity-enhancing instrumentation and controls company, today issues a trading update for the six months ending 30 June 2009, ahead of its half year results announcement due to be released on 25 August 2009.
As previously indicated, the company has experienced challenging market conditions during the first half of the year. On a constant currency organic basis, sales are expected to have declined by approximately 20% compared with the comparatively strong first half in 2008. On a reported basis, sales are expected to be up by 4%, including a 7% contribution from acquisitions and beneficial effects from currency of 17%.
Demand across business segments and major geographical regions continued to be weak, particularly in the automotive and mining sectors. However, research and environment-related areas showed greater resilience. Despite market conditions, gross margins improved on a constant currency organic basis. Restructuring charges, including post-acquisition integration charges, will be around £7 million in the first half, with at least a further £3 million estimated for the second half. Accordingly, our expectation is that operating profit in the first half will be around £20 million, reflecting a combination of the decline in operating profit on the organic revenue shortfall and the restructuring and post-acquisition integration charges incurred in that period.
Our balance sheet and financial position remain strong. Net debt has increased by approximately 10% since the year end, influenced by the acquisition of Lochard in February for an initial consideration equivalent to £19 million, with normal first half outflows offset by strong cash conversion in the period which is expected to exceed 150%, driven by a continued focus on rigorous operating cash flow management.
After a challenging first half, visibility of customer demand remains limited. However, we expect to see an improving performance in the second half resulting from the benefits of the restructuring and post-acquisition integration actions as well as anticipating some improvement in the level of business. We are confident that the company's long-term fundamentals are robust and we remain in a strong position to take advantage when our markets return to growth.
