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Introduction
This is my first statement as Chairman of Spectris plc, following my appointment in May this year, and I am delighted to be able to report another six months of good progress for the company.
Sales and operating profit improved during the first half of 2008 compared with the corresponding period in the prior year. Sales increased by 16% to £358.5 million compared with £308.7 million in the first half of 2007*. On a constant currency basis, sales increased by 8%, of which approximately 2% is from acquisitions. The strengthening of the Euro had a significant positive impact on sales and a smaller, but still positive, impact on operating profit.
Operating profit increased by 18% to £46.4 million (2007: £39.4 million). On a constant currency basis, operating profit increased by 15%, of which 3% is from acquisitions. Operating margins increased by 0.2 percentage points to 13.0%. Profit before tax increased by 16% to £42.6 million (2007: £36.8 million) and earnings per share increased by 28% to 26.6 pence (2007: 20.8 pence).
Cash conversion was strong, with 89% of operating profit converted to operating cash. As a result of the share buy-back, capital expenditure and acquisition costs, net debt at the end of the period was £90.5 million, compared with £77.3 million at the end of December 2007. Net interest costs were £3.8 million, giving an annualised cover of 15.2 times.
The Board has declared an interim dividend of 6.4 pence (2007: 5.75 pence). The dividend will be paid on 14 November 2008 to shareholders on the register on 24 October 2008.
Board changes
I would like to take this opportunity to acknowledge the accomplishments of my predecessor, John Poulter, who retired after this year's Annual General Meeting. John joined the company in 1988, initially as Group Managing Director, was appointed Chief Executive in 1992 and became Chairman in 2001, during which time the company was transformed from a small, predominantly UK-based mechanical engineer, into an international instrumentation and controls business. On behalf of the Board, I extend our thanks to John for his outstanding contribution, support and dedication during the twenty years he spent with the company.
Outlook
Orders to date continue to be encouraging. Our balance sheet and financial position remain strong and we believe the diversity of the end markets and geographies we serve, as well as our focus on enhancing customers' productivity, should provide resilience and growth opportunities. Looking forward, we continue to anticipate results in line with expectations for the remainder of 2008.
John Hughes
Chairman
* Two businesses were divested in the first half of 2007. In order to aid understanding of the results for the ongoing business, references in the Chairman's statement, the Chief Executive's review and the Financial review to the sales and operating profit results in the 2007 comparatives exclude the results of these two businesses. Unless otherwise stated, figures for operating profit, profit before tax and earnings per share are adjusted measures – for explanation of adjusted figures and reconciliation to the statutory reported figures see Note 2.