Materials Analysis
The Materials Analysis segment provides a wide range of analytical instrumentation and systems for material characterisation to the semiconductor, pharmaceuticals and life science industries, with applications also in metals and mining. Our products help customers to improve accuracy and speed of materials analysis in the laboratory and in process manufacturing applications. The companies in this segment are Malvern Instruments, PANalytical and Particle Measuring Systems.
Sales in Materials Analysis increased by 8% at constant currencies. Strength in the mining and pharmaceutical industries was partially offset by a decline in sales to semiconductor customers. Operating profit increased by 1% at constant currencies, but at current exchange rates was £13.5 million compared with £13.9 million in the prior period. This was due to an increase of almost 40% in R&D expenditure and the dilutive effects of foreign exchange. As a result, operating margins were 2 percentage points lower at 11.7%. The increase in research and development was primarily to accelerate new product development programmes aimed at capturing growth opportunities in the metals, minerals and mining industries and the life science industry. Similar expenditure is expected in the second half of the year, with the benefits appearing from 2009 onwards.
The continued strength of the mining and minerals industry benefited Malvern and PANalytical, particularly in Australia, China and Brazil, as the demand for commodities drives investment in this sector. Demand for cement and steel also benefited both companies, particularly in South America and India.
Customer activity in the pharmaceutical industry continued to be strong. The current focus on detecting counterfeit drugs has benefited PANalytical and Malvern, whose applications can analyse tablets and capsules directly in their packaging to determine whether the active ingredients of a drug match those supplied by its authentic manufacturer or are a counterfeit product. In May, Malvern established a joint venture with its long-term distribution partner in India, highlighting the growing importance of the pharmaceutical industry, and other markets, in this region. Particle Measuring Systems signed an agreement with 3M Health Care for the global distribution rights to the Biotrace MicroSafe family of products. These products are used to detect biological contamination in sterile environments, with particular applications in the life science industry.
PANalytical saw good demand for its products for research and development applications in the semiconductor industry, particularly for the development of LEDs for lighting and photovoltaic cells for solar panels in Taiwan, China and Japan. Particle Measuring Systems launched a new portable aerosol particle counter, which is smaller and lighter than previous products. This product enables faster detection of particle contamination in cleanrooms, reducing wastage for customers in the semiconductor industry.
Test and Measurement
The Test and Measurement segment supplies test and measuring equipment for research and development, principally to the aerospace and automotive industries. For customers in these industries, our products and applications help them to design safer, more fuel-efficient, environmentally-friendly vehicle platforms whilst reducing time to market. Further applications are in consumer electronics and the environmental monitoring market. The companies in this segment are Brüel & Kjær Sound and Vibration and HBM.
Sales in Test and Measurement increased by 6% at constant currencies. Operating profit increased by 32% to £11.5 million and operating margins increased by 1.1 percentage points to 10.1%.
In the automotive industry, continued investment in research and development of new models benefited both Brüel & Kjær and HBM. Brüel & Kjær’s noise analysis equipment is used by automotive manufacturers to improve vehicle acoustics in new models, and the company received a significant order from Toyota Motor Corporation in Japan. Brüel & Kjær also launched the LAN-XI, a new hardware platform for its successful PULSE data acquisition software. Throughout the automotive industry manufacturers are seeking to develop more environmentally-friendly, cleaner-burning engines by improving engine fuel consumption and simultaneously reducing exhaust emissions. HBM’s data acquisition systems are being used by a number of manufacturers and automotive consultancies for new engine and powertrain development.
In the aerospace industry, modern lightweight materials are increasingly being used for aircraft development, with fibre composite technology, in particular, resulting in significant weight savings. HBM’s optical sensor technology is used in simulation and testing equipment to determine durability and stress behaviour in components in order to optimise the structural strength of the new materials.
In-line Instrumentation
In-line Instrumentation provides process analytical measurement, asset monitoring and on-line controls for both primary processing and the converting industries. Our products and applications provide precision measurement in challenging operating environments, ensuring process quality, asset uptime, safety, and improved yield. The companies in this segment are Beta LaserMike, Brüel & Kjær Vibro, BTG Group, Fusion UV Systems, NDC Infrared Engineering and Servomex.
Sales in In-line Instrumentation increased by 11% at constant currencies. Operating profit increased by 34% to £16.8 million and operating margins increased by 1.9 percentage points to 15.5%, reflecting the benefits of operational leverage and the restructuring programmes in 2006 and 2007.
Investment in refining and production capacity was maintained as the price of oil continued to rise and demand shows no sign of abating, benefiting Brüel & Kjær Vibro and Servomex. The high oil price has brought renewed focus on alternative energy sources, such as solar and wind power, which has also benefited Brüel & Kjær Vibro, whose remote monitoring systems are used to monitor wind turbines. Servomex’s two key markets of industrial gas and hydrocarbon processing continued to show strong growth, with the majority of new build activity taking place in Asia. The company received a number of orders for petrochemical projects in Asia and will complete the assembly of these systems at its Shanghai facility in closer proximity to the end customers. Integration of the Contrôle Analytique business, acquired by Servomex at the end of 2007, is on schedule and the business is performing well, particularly in Asia.
Demand from the converting industry continued to benefit Fusion UV Systems, NDC and Beta LaserMike. Fusion saw good sales growth in Asia for film coating products as demand for flat panel displays continued to be strong.
The metals and minerals market continued to show growth, particularly in China, benefiting NDC and Beta LaserMike. Beta LaserMike saw good sales of its LaserSpeed product to the wire and cable and extrusion markets, and extended its applications beyond the traditional cold-rolling environment in the metals sector. The company is also benefiting as investment returns to the optical fibre market. In the pulp and paper industry, demand was strong for BTG’s Duroblade products, particularly in China and Japan. The company launched a number of new products which are smaller, lighter and easier to use, helping customers to improve the quality of the pulp whilst reducing energy consumption.
Industrial Controls
Industrial Controls supplies automation and control products for the discrete manufacturing industries. Our products provide identification and tracking solutions during the manufacturing process, displays for process monitoring and control, and data interfaces for a broad range of manufacturing industries. Sales are indirectly to end users via distributors as well as directly to original equipment manufacturers, with a significant proportion of repeat business. The companies in this segment are Microscan and Red Lion Controls.
Sales in Industrial Controls increased by 9% at constant currencies. Operating profit increased by 7% to £4.6 million.
Microscan saw continued demand for its product tracking systems as manufacturers implemented process improvements and a significant order was received from a leading US consumer electronics player for its factory automation system in China.
Red Lion Controls saw good international growth for its human machine interface and data station products, particularly in China where market coverage is improving. The company continued to increase sales from distribution channels such as catalogues and on-line stores.
John O'Higgins
Chief Executive