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Overview
Spectris delivered increased sales, profits and earnings per share in the first half of 2007 compared with the corresponding period in 2006, after adjusting for disposals and acquisitions. Total group sales in the first half were £317.3 million compared with £327.3 million in the prior year. Sales from continuing businesses increased by 1.7% to £308.7 million (2006: £303.6 million)*. However, taking into account the weakness of the US dollar and the Japanese yen against sterling, at constant currencies sales increased by 7.6%. Sales in local currencies increased across all geographies, reflecting the on-going strong demand from the global industries which the group serves.
Despite the currency disadvantage, adjusted operating profit increased by 26% to £39.4 million (2006: £31.3 million). The increase in operating margins by 2.5 percentage points, from 10.3% to 12.8%, is encouraging and evidence of the Board’s determination to restore margins to a level commensurate with the high quality of the group’s businesses.
Profit before tax increased by 34% to £36.8 million (2006: £27.5 million) and earnings per share increased by 32% from 15.7p to 20.8p.
Cash conversion was strong with 93% of operating profit converted to operating cash. Net proceeds from the disposal of the Ircon and Spectrum businesses were £30.4 million. Whilst the buy-back of 3.5 million shares absorbed £32.5 million, net debt at the end of the period was £62.1 million, compared with £71.7 million at the end of December 2006. Interest costs were £3.1 million, giving an annualised cover of 13.1 times.
The Board proposes to pay an interim dividend of 5.75p, an increase of 15%. The dividend will be paid on 16 November 2007 to shareholders on the register at 26 October 2007.
Board changes
Andrew Given retired from the Board at the AGM in May, having completed his two three-year terms, and I re-iterate my thanks to him expressed earlier in the year. I should like to welcome John Hughes, who joined the Board as a non-executive director in June.
Outlook
The order backlog, together with current order levels and increasing margins, provides confidence that the group will show continued improvement consistent with expectations for the year.
John Poulter
Chairman
24 August 2007
*Unless otherwise stated, all sales and operating profit figures are on a continuing businesses basis and exclude the businesses divested. Figures for operating profit, profit before tax and earnings per share are adjusted measures - for explanation of adjusted figures see Note 2.