 |
||
|
 |
"2006 was a successful year, both in terms of the results achieved and in positioning Spectris to deliver improved performance in 2007. The current year has started on a strong note, with good order levels across all sectors and geographies. As the benefits of management actions to improve margins further are realised, we are confident of achieving continued good progress." |
Overview
2006 was a good year for Spectris, with sales, profits and earnings per share all increasing compared to the prior year. Total group operating margins improved to 12.5% (12.9% in continuing businesses) as the operational gearing from robust growth and management restructuring actions in the past two years began to deliver the desired benefits.*
Total group sales increased by 4% to £684.5 million (2005: £655.9 million) and operating profit increased by 17% to £85.7 million (2005: £73.5 million), or 12.5% of sales. Sales from continuing businesses increased by 7% to £642.6 million (2005: £599.2 million) and operating profit increased by 16% to £83.2 million (2005: £71.5 million), or 12.9% of sales. Profit before tax increased by 26% to £76.3 million (2005: £60.5 million) and earnings per share increased by 21% to 43.7p (2005: 36.2p). This performance was achieved notwithstanding some adverse currency effects and a charge of £7.7 million (2005: £2.5 million) taken through the income statement for restructuring in continuing businesses. Underlying margins were therefore approaching the group's target range. Operating cash conversion was strong at 107% of operating profit.
The Board proposes to pay a final dividend of 12.5p which, combined with the interim dividend of 5.0p, gives a total of 17.5p (2005: 15.8p), an increase of 11%. The dividend will be paid on 22 June 2007 to shareholders on the register at 1 June 2007.
An agreement for the sale of the Spectrum Inspection Systems business to Illinois Tool Works Inc was signed on 22 February 2007 for completion on 28 February 2007. The total consideration is £16 million on a debt and cash-free basis and subject to a working capital adjustment.
Share buy-back
Over the last three years, year-end net debt has reduced to £72 million from £163 million, principally as a result of strong internal cash generation. In addition to its ordinary dividend payments, the company now intends to return up to £75 million over the next twelve months by way of a share buy–back programme. This will improve the efficiency of the balance sheet, whilst also allowing the company to retain the financial flexibility necessary to fund its continued development.
Board changes
Having served for two terms as a non-executive director, Andrew Given, Senior Independent Director, who joined the Board in 2001, will retire at the May 2007 AGM. I should like to thank Andrew for his contribution to the company and for his Chairmanship of the Audit Committee during the past six years. John Warren has assumed the latter role from 1 January 2007 and Tony Reading will become Senior Independent Director with effect from the May 2007 AGM.
Outlook
2006 was a successful year, both in terms of the results achieved and in positioning Spectris to deliver improved performance in 2007. The current year has started on a strong note, with good order levels across all sectors and geographies. As the benefits of management actions to improve margins further are realised, we are confident of achieving continued good progress.
John Poulter
Chairman
* Unless otherwise stated, all sales and operating profit figures in the
narrative are on a continuing businesses basis and exclude the businesses
sold and held for sale. Figures for operating profit, profit before tax
and earnings per share are adjusted measures – for explanation of adjusted
figures see Note 3.