Half Yearly Report

RNS Number : 1921K

Spectris PLC

26 July 2013

 



SPECTRIS PLC

2013 HALF YEAR RESULTS

26 July 2013 - Spectris plc, (SXS: LSE) the productivity-enhancing instrumentation and controls company, announces half year results for the six months ended 30 June 2013.

Highlights

·      Q2 sales grew 7% on a reported basis, 3% like-for-like

·      Pipeline activity remains strong, although trading continues to be characterised by longer order cycles

·      Continued investment in geographic expansion and the accelerated R&D programmes

·      Cost saving actions in place to deliver the previously announced £10 million of net savings for the year

·      Interim dividend up 9% to 14.75 pence per share 

Adjusted performance measures excluding divested businesses: *	H1 2013	H1 2012**	Change	Change at CER***	Like-for-like change****
Sales £m	566.2	570.5	-1%	-2%	-3%
Adjusted operating profit* £m	80.1	92.8	-14%	-16%	-16%
Adjusted profit before tax* £m	75.0	86.2	-13%
Adjusted earnings per share*	48.4p	54.9p	-12%
Adjusted return on sales*	14.1%	16.3%	-2.2pp
Dividend	14.75p	13.50p	+9%
Statutory
Sales £m	570.4	596.7	-4%
Operating profit £m	65.9	79.4	-17%
Profit before tax £m	154.8	74.8	+107%
Basic earnings per share	90.9p	49.0p	+86%
* The 'adjusted performance measures excluding divested businesses' represent the statutory results excluding certain non-operational items and the trading results and impact of the disposal of the Fusion UV business on 31 January 2013.  For a full reconciliation please see note 2 ** The 2012 comparatives have been restated following the adoption of IAS 19 (Revised) 'Employee Benefits' (see note 1) *** At constant exchange rates (CER) **** At constant exchange rates and excluding acquisitions

Commenting on the results, John O'Higgins, Chief Executive, said:

"Trading improved during the second quarter across all segments. We remain encouraged both by the strong overall level of our opportunity pipeline and the expected delivery of our planned £10 million net cost savings for the full year. Our businesses are strategically well positioned and, assuming the improved trading conditions seen in the second quarter continue, the Board of Spectris is confident it will deliver full year performance in line with its expectations."

Contacts:

Spectris plc
John O'Higgins, Chief Executive	[phone]
Clive Watson, Group Finance Director	[phone]
Cléa Rosenfeld, Head of Corporate Affairs	[phone]
FTI Consulting
Richard Mountain / Susanne Yule	[phone]

The meeting with analysts will be available as a live webcast on the company's website at www.spectris.com, commencing at 9.00 am BST, and a recording will be posted on the website shortly after the meeting.

Copies of this notice are available to the public from the registered office at Heritage House, Church Road, Egham, Surrey TW20 9QD, and on the company's website at www.spectris.com

About Spectris

Spectris plc is a leading supplier of productivity-enhancing instrumentation and controls. The Company's products and technologies help customers to improve product quality and performance, improve core manufacturing processes, reduce downtime and wastage and reduce time to market. Its global customer base spans a diverse range of end user markets. Spectris operates across four business segments which reflect the applications and industries it serves: Materials Analysis, Test and Measurement, In-line Instrumentation and Industrial Controls. Headquartered in Egham, Surrey, England, the Company employs approximately 7,500 people located in more than 30 countries.

For more information, visit www.spectris.com

CHAIRMAN'S STATEMENT

Introduction

We were pleased to see growth resume during the second quarter following a challenging start to the year. Trading improved in all four regions and like-for-like growth was recorded by all four segments. Customer activity was strong and our prospect pipeline remained healthy throughout the period.

Performance

Reported sales were down 1% for the period at £566.2 million (H1 2012: £570.5 million), with contributions from acquisitions and currency of 1% each. Therefore, like-for-like sales were down 3% for the period.

Adjusted* operating profit was down 14% to £80.1 million on a reported basis (H1 2012: £92.8 million). Operating margins of 14.1% (H1 2012: 16.3%) were lower than the same period last year primarily due to lower volume. Net debt was £157 million as at 30 June 2013, £97 million lower than the position at the beginning of the year (£254 million).

Dividend

The Board is proposing to pay an interim dividend of 14.75 pence per share, an increase of 9% over the first half of last year (H1 2012: 13.50 pence per share). The interim dividend is covered 3.3 times. This is consistent with our policy of making progressive dividend payments based upon affordability and sustainability. The interim dividend will be paid on 8 November 2013 to shareholders on the register at the close of business on 18 October 2013. 

Summary and outlook

Trading improved during the second quarter across all segments. We remain encouraged both by the strong overall level of our opportunity pipeline and the expected delivery of our planned £10 million net cost savings for the full year. Our businesses are strategically well positioned and, assuming the improved trading conditions seen in the second quarter continue, the Board of Spectris is confident it will deliver full year performance in line with its expectations.

John Hughes

Chairman

*Unless stated otherwise, figures quoted for operating profit, net interest, profit before tax, tax, earnings per share and operating cash flow are adjusted measures restated for IAS 19 (Revised) 'Employee Benefits' (see note 1). In addition, all income statement and operating cash flow figures have been restated to exclude the trading results and impact of the disposal of the Fusion UV business which was sold on 31 January 2013. For an explanation of adjusted and restated figures and a reconciliation to the statutory reported figures, see Notes 1 & 2.

CHIEF EXECUTIVE'S REVIEW

Introduction

We saw improved trading conditions in the second quarter with growth in all four segments. Sales in the second quarter were up 7% on a reported basis and 3% on a like-for-like basis over the same period last year. This performance was aided during the second quarter by some strong end-markets in the aerospace and defence, pulp and paper and pharmaceutical sectors, offset by weakness in semiconductor, telecoms and electronics.

Regionally, like-for-like sales for North America (32% of group sales) declined 6% in the first half, although the decline slowed in the second quarter. Sales to Europe (32%) grew 4% in the second quarter reducing the half year decline to 1%. In Asia (29%), trading recovered from a weak first quarter with a return to growth in the second quarter (up 6%) resulting in a 5% decline in the first half. Sales to the rest of the world (7%) increased 20% in the second quarter bringing the first half growth to 13% helped largely by Africa and South America. Aftermarket service and consumables sales increased by 7%, like-for-like, in the first half and, as a percentage of total revenue, grew from 24% to 26%. We continue to estimate that approximately 40% of group sales are exposed to operating budgets.

We continued to invest in our R&D pipeline with expenditure increasing on a like-for-like basis by 8% and on a reported basis by 13% to £44.6 million from £39.4 million in the first half of 2012. These incremental investments were mainly in the Materials Analysis segment where, last year, we initiated new life sciences and advanced materials measurement programmes. Consequently, Materials Analysis benefited from a 15% like-for-like increase in R&D expenditure during the first half.

As reported in April, a cost savings programme was implemented which is on track to deliver £10 million net benefit in 2013 mostly weighted to the second half of the year. Cost saving measures include restructuring actions, reductions in semi-variable and discretionary costs as well as other actions including recruitment and pay freezes.

	Materials Analysis		Test and Measurement		In-line Instrumentation		Industrial Controls		Total
	H1 2013	H1 2012	H1 2013	H1 2012	H1 2013	H1 2012	H1 2013	H1 2012	H1 2013	H1 2012
Sales (£m)	166.5	166.1	162.1	164.6	126.4	128.6	111.2	111.2	566.2	570.5
LFL growth	-3%	7%	-3%	3%	-3%	1%	-2%	-1%	-3%	3%
Adj. op. profit (£m)	20.6	25.1	17.0	23.3	21.0	21.2	21.5	23.2	80.1	92.8
% ROS Reported	12.4%	15.1%	10.5%	14.2%	16.6%	16.5%	19.4%	20.8%	14.1%	16.3%
% After Sales	30%	30%	23%	19%	45%	41%	2%	1%	26%	24%

All segments grew in the second quarter on a like-for-like basis. Test and Measurement and Industrial Controls grew by 4% on a like-for-like basis in the second quarter. In-Line Instrumentation grew 3% and Materials Analysis grew 2% resulting in the half year declines noted above in the table. Margins in In-Line Instrumentation were sustained by favourable mix from strong growth in aftersales. Operating margins in Materials Analysis were down due to the increase in R&D spending and lower volumes. Industrial Controls' margins were affected by our International expansion programme and operating margins in Test and Measurement declined due to lower volumes and adverse mix. Further details on the individual segment performance can be found in the Operating Review which follows.

Cash conversion in the first half of 2013 was 81% of operating profit. Net debt declined to £157 million, giving a 12-month trailing net debt to EBITDA ratio of 0.7 times.

Strategy

We made further progress with our strategy during the first half of this year. We launched several new innovative products and continued to invest in our R&D pipeline. We also expanded in developing countries, with our strengthened operations in China and Brazil and as well as a newly established presence in Russia providing us with additional growth opportunities. We have a strong balance sheet and we will continue to look for strategically attractive acquisitions which will further contribute to future growth.

John O'Higgins

Chief Executive

Operating Review

MATERIALS ANALYSIS

Materials Analysis provides products that enable customers to determine structure, composition, quantity and quality of particles and materials, during their research and product development processes, when assessing raw materials before production, or during the manufacturing process. Our products help customers to improve accuracy and speed of materials analysis in the laboratory. We see a growing demand for the application of our solutions in quality and process control in pharmaceutical manufacturing as well as in the mining, minerals and chemical sectors. Our key customers in this segment are leaders in the academic research, mining and cement, pharmaceutical, chemical and electronics industries. The operating companies in this segment are Malvern Instruments, PANalytical and Particle Measuring Systems.

Segment performance

	H1 2013	H1 2012	% change	% change like-for-like
Sales (£m)	166.5	166.1	-	-3%
Operating Profit (£m)	20.6	25.1	-18%	-20%
Return on sales (%)	12.4	15.1	-2.7pp	-2.6pp
% of total group sales	29	29	-

Like-for-like sales for this segment grew 2% in the second quarter resulting in a 3% decline for the period. Operating margins were down 2.6 percentage points mainly as a result of the increased spend on R&D, which was up 15% compared to last year, as well as being a consequence of the sales decline.

Sales in metals, minerals and mining declined in the first half of the year due to weaker demand in the metals industry and on-going investment curtailment in new projects from mining customers. However, spending on upgrades and services is being maintained at existing sites which helped mitigate some of the shortfalls from new projects.

The academic research market remained weak due to recent US Government budget sequestration and similar budget reduction in some Asian markets. However, in Europe demand was good and we grew in this area in the first half.

The pharmaceutical sector performed well during the first half of 2013 and this trend is expected to continue as the life sciences market flourishes. Growth in this sector is also driven by the adoption of enhanced international standards such as those concerning Good Manufacturing Practice. Pharmaceutical companies, including generic manufacturers, continue to focus on aseptic manufacturing and our business in this market has grown at a rate of 18% p.a. over the last three years.

Segment outlook

The pharmaceutical sector is expected to show continued good progress. However, as budget constraints still influence spending decisions, we expect that the academic research and the resource sectors will remain challenging through the remainder of 2013. We will continue to maintain our spending on development of new products and applications at current levels, and we are on track to launch several new products in 2014.

TEST AND MEASUREMENT

Test and Measurement supplies test, measurement, and analysis equipment and software for product design optimisation, manufacturing control, and environmental monitoring systems. Markets are principally the aerospace, automotive and consumer electronics industries. For customers in the automotive and aerospace industries, our products and applications help them to design and test new products whilst reducing time to market. In consumer electronics, our equipment and software enable customers to refine the performance and accuracy of their products and to test them in the production process. In the environmental monitoring market, the desire for higher standards of community comfort is driving increasing demand. The operating companies in this segment are Brűel & Kjær Sound & Vibration and HBM.

Segment performance

	H1 2013	H1 2012	% change	% change like-for-like
Sales (£m)	162.1	164.6	-2%	-3%
Operating Profit (£m)	17.0	23.3	-27%	-29%
Return on sales (%)	10.5	14.2	-3.7pp	-3.8pp
% of total group sales	29	29	-

Like-for-like sales for Test and Measurement rose 4% in the second quarter leaving this segment down 3% for the half year. Like-for-like operating margins declined 3.8 percentage points primarily due to lower volumes and adverse mix. 

We continued to retain leading positions in the aerospace market which performed well aided by important new orders from Airbus. Airbus selected our LAN-XI data acquisition system to evaluate noise emissions from its aircraft engines and their impact on passengers as well as ground maintenance personnel.

The automotive sector had a weak first half of the year as US and Japanese customer demand remained unpredictable in the current economic climate. However, demand in European countries grew with customer activity generally continuing to show signs of recovery, evidenced by some large orders being placed.

In April 2013 we introduced Sonoscout, a dedicated solution for in-vehicle data recording. Sonoscout connects a LAN-XI front-end wirelessly to an iPad® or an iPhone® to provide an in-vehicle data recording solution. Sonoscout represents an innovative development in the Noise Vibration and Harshness measurement area for key automotive customers, significantly reducing time spent in setup and data recording.

Sales to consumer electronics customers were down during the first half of this year caused partly by customer order delays and also as a result of a challenging comparison over the first half of 2012 when substantial one-off orders were placed, especially in Asia. New opportunities were realised in this sector with, for example, new applications such as stress measurement in printed circuit boards enabled with a newly launched data acquisition module for strain gauge measurements from the QuantumX system. In the consumer electronics market, higher data bandwidth associated with new telecom services is expected to increase the use of audio and video streaming through consumer devices leading to an increase in the sound quality testing requirements.

We recorded good growth in sales of environmental noise monitoring services during the second quarter. In the US, we secured a large order from the Port Authority of New York and New Jersey for all the major airports located in this area. In addition, a campaign to monitor noise for mining and gas 'fracking' operators located close to built-up areas was initiated in the US which is expected to provide opportunities in the future. We also won several important projects in South Africa for noise monitoring covering airports, mining sites and construction projects.

Positive trends in industries such as rail and marine offer additional growth opportunities; in the rail industry we received orders from the Austrian National Rail operator ÖBB following development of a load monitoring system for rails to meet their specific requirements. This system enables the measurement of static and dynamic loads from trains. In the marine sector we have secured new business in the offshore oil & gas sector for rig monitoring and have begun to capitalise on the demand for on-line emissions monitoring for large marine diesel engines.

Segment outlook

We continue to identify opportunities coming from all of the end market segments in which we operate. We see growing demand for hybrid and electric cars as well as ever demanding fuel efficiency and emissions targets for conventional internal combustion engine vehicles which we expect will revitalise growth opportunities particularly in Asia and in the US.

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. Our key customers here are in the electronics, petrochemicals, oil and gas, pulp and paper, energy, manufacturing, automotive, and medical industries. The operating companies in this segment are Beta LaserMike, Brűel & Kjær Vibro, BTG Group, NDC Infrared Engineering and Servomex.

Segment performance

	H1 2013	H1 2012	% change	% change like-for-like
Sales (£m)	126.4	128.6	-2%	-3%
Operating Profit (£m)	21.0	21.2	-1%	-4%
Return on sales (%)	16.6	16.5	+0.1pp	-0.1pp
% of total group sales	22	23	-1pp

Like-for-like sales for In-Line Instrumentation grew 3% in the second quarter resulting in a decline of 3% for the period. Margins remained strong benefiting from a favourable mix which saw aftersales grow more than 4 percentage points to 45% of sales during the first half of 2013.

The energy and utilities sector, whilst down in the first quarter compared with the same period in 2012, recovered well in the second quarter. Downstream chemical and refining investment activity continues to be strong in the Middle East, China, South East Asia and India. We signed an agreement with Precisive LLC (Boston USA) for the exclusive global distribution of our newly launched SpectraScan scanning infra-red hydrocarbon speciation technology. This analyser is a unique alternative to process gas chromatographs used in refining processes. Air Products have replaced an aging gas chromatograph installation and, as a result, we booked a substantial order with end destinations in France, Germany, Israel and Belgium. In June, we launched OxyDetect which is our first gas detection product developed in conjunction with BP. OxyDetect is positioned to be a significant game changing product in its market, due to its non-depleting property. In the wind power sector, the focus of end users on condition monitoring solutions is also increasing, providing us with good growth opportunities. We have already made progress with notable orders from EDF and we expect further demand from the utility operators during the second half of 2013. We released our VibroSuite condition monitoring platform for wind turbine vibration monitoring comprising a suite of software packages to reduce maintenance costs and increase uptime.

In the healthcare sector, we see increasing interest from customers for new products. We had good success with our UltraScan product, an ultrasonic wall and concentricity measurement system, which is used for quality control in the manufacture of medical tubing for products such as catheters, drug delivery tubing, and other medical devices. 

The acquisition of DCM Industries in 2012 enabled us to enter the automated cable testing market, which has positioned us well with customers in data, telecom, coaxial and defence markets. As the need for automated quality testing of cables has grown, we are now a leading provider of end-to-end solutions for in-process measurement and off-line cable testing. The DCM HPCC-3000 RF coaxial cable test system was selected by a leading global prime defence contractor to support the F-35 Joint Strike Fighter programme.

We saw good growth in the pulp and paper market as major producers expanded capacity in emerging markets and invested in productivity improvements. We experienced particularly strong demand for tissue applications which had double digit growth both in Western Europe and the Americas. In China, demand was strong for our high performance coating blades driven by paperboard production as measures are being taken by producers of coated paper to reduce costs and improve quality at existing mills.

Segment outlook

We expect pulp and paper to continue to grow modestly and to see some recovery in selected areas of the energy segment, in particular with retrofit opportunities in the wind power sector. We are well-positioned for the longer term growth trends in the key end-markets in this segment. We continue to see growth in emerging markets, and we will develop and increase our presence in these key regions.

INDUSTRIAL CONTROLS

Industrial Controls provides products and solutions that measure, monitor, control, inform, track, and trace during the production process. Our key customers here include industrial manufacturing, automotive, electronics, packaging, and life sciences. Sales, in this segment, are mainly financed through customers' operating expenditure budgets and therefore cyclicality associated with exposure to capital expenditure is limited. The operating companies in this segment are Microscan, Omega Engineering and Red Lion Controls.

Segment performance

	H1 2013	H1 2012	% change	% change like-for-like
Sales (£m)	111.2	111.2	0%	-2%
Operating Profit (£m)	21.5	23.2	-7%	-9%
Return on sales (%)	19.4	20.8	-1.4pp	-1.5pp
% of total group sales	20	19	+1pp

Like-for-like sales for this segment were up 4% in the second quarter over the same period last year giving a 2% decline for the first half of 2013. In the second quarter, we saw good recovery in growth from the general manufacturing sector for our industrial measurement, communication and control products. Operating profit margins were down on the back of increased spend in our Omega business as it accelerates its geographical expansion.

The successful integration of NTron, Sixnet and Red Lion has provided a strong foundation for future growth in the industrial automation and communication market. A vertical market sales strategy focused on the key markets of factory automation, oil and gas, energy, transportation, mining and minerals, and military networking, is expected to increase access to further market opportunities. Demand for applications for the defence segment as well as the automotive market continued to be strong for our switches and networking portfolio, with several large orders received during the period.

Our internationalisation programme for Omega is well under way and the business got off to a good start in China during the first half, where the new Shanghai-based customer service centre is becoming established. Growth in China was helped by a rapid expansion of the end-customer base due to the availability of local language support. During the first half of 2013, we also launched Spanish and Italian language websites. We will continue to expand our reach in Latin America and in other Asia Pacific countries later this year.

We saw robust activity in the clinical and OEM markets which performed well and helped to offset weakness in the semiconductor market. Sales of machine vision products are gaining traction as we continue to provide customers with innovative solutions. For example, after a new European directive was adopted to prevent counterfeit medicines from illegally entering the supply chain, Boehringer Ingelheim, implemented a state-of-the-art solution to ensure that its products met these requirements. Working with our partner Elchema, we provided an all-in-one printing and inspection solution to ensure traceability throughout the supply chain. Each box containing medicines is marked with production data as well as a unique serial number. Our Vision Hawk Machine Vision solution and our AutoVISION management software ensure full compliance with the European Union's directives and other regulations to ensure patient safety.

Segment Outlook

We will continue to focus on key market areas providing good growth opportunities for our Industrial Controls businesses. With the recent acquisitions now fully integrated, combined with our progress in launching those businesses in new countries, this segment is well positioned for the future. 

Financial Review

Introduction

Spectris uses adjusted figures as key performance measures in addition to those reported under adopted IFRS. Adjusted figures exclude certain non-operational items which management has defined in Note 2. Unless stated otherwise, figures quoted for operating profit, net interest, profit before tax, tax, earnings per share and operating cash flow are adjusted measures restated for IAS 19 (Revised) 'Employee Benefits' (see Note 1). In addition, all income statement and operating cash flow figures quoted have been restated to exclude the trading results and impact of the disposal of the Fusion UV business which was sold on 31 January 2013. 

Sales in the first half decreased by 1% from £570.5 million in 2012 to £566.2 million in 2013. The year-on-year contribution to sales from acquisitions was £4.3 million, or 1%, and currency contributed a further 1%, with the result that, on an organic constant currency (like-for-like - LFL) basis, sales declined by 3%.

As a result of the decline in sales, the group took action in April to reduce its cost base through a combination of temporary cost saving measures and restructuring actions. The cost of the restructuring has been largely borne in the first half of 2013 with the benefit mainly expected to arise in the second half of the year.  However, the Group has continued to invest in its previously announced growth programmes in innovation (R&D +8% LFL, mainly in the Materials Analysis segment) and in the globalisation of Omega Engineering.

The combination of the reduction in profit arising from the sales decline, the additional cost of continuing to invest in our growth programmes and the incremental restructuring cost to protect profitability, resulted in operating profit decreasing by 14% from £92.8 million in 2012 to £80.1 million in 2013. There was a modest profit contribution from acquisitions and foreign exchange had a positive impact of 2% with the result that LFL operating profit declined by 16%.The operating margins decreased by 2.2pp from 16.3% in 2012 to 14.1% on a reported and LFL basis in 2013.

The year-on-year decrease in net finance costs is £1.5 million (from £6.6 million in 2012 to £5.1 million in 2013). This is mainly due to average net debt being approximately £176 million lower than in the same period in 2012 as a result of the sale of the Fusion UV business in January 2013.

Profit before tax decreased by 13% from £86.2 million in 2012 to £75.0 million in 2013.

Based on the forecast for the full year, the effective tax rate excluding divested businesses for the half year is estimated at 24.0% (2012 full year: 25.3%), in line with the expected full year geographic mix of profits. 

The lower operating profit, reduced interest charge and reduced tax rate resulted in earnings per share decreasing by 12% from 54.9 pence to 48.4 pence. 

Operating cash flow of £65.1 million (2012: £78.8 million) resulted in an operating cash flow conversion rate of 81% (2012: 85%). Net debt decreased by £97.3 million (2012: decrease of £27.2 million) from £254.1 million at 31 December 2012 to £156.8 million at June 2013 with the operating cashflow being supplemented by the receipt of the net proceeds arising from the disposal of the Fusion UV business.

Principal Risks and Uncertainties

The group has in place processes for identifying, evaluating and managing the key risks which could have an impact upon the group's performance.

The current risks, together with a description of how they relate to the group's strategy and the approach to managing them, are set out in the 2012 Annual Report which is available on the group's website at www.spectris.com.  The group has reviewed these risks and concluded that they adequately represent the current principal risks and uncertainties of the company and will continue to remain relevant for the second half of the financial year. They comprise:

-     Acquisition integration

-     New product development

-     Competitive activity

-     Supply chain disruption

-     Fluctuations in exchange rates

-     Intellectual property

-     Political and economic environment

-     Compliance with all relevant laws and regulations

-     Information security

In addition, the group continues to monitor and control its exposure to those countries where continuing economic uncertainties exist and, in particular, carefully monitors developments in the Eurozone. We believe that the broad spread of markets in which we operate substantially limits the risk associated with additional instability in any given territory.

We continue to monitor the situation and to assess our exposure and the impact on our business to ensure that we are well placed to mitigate the effects of any instability if it arises.

The potential impact of these risks on our strategy and financial performance, together with details of our specific mitigation actions, are set out in the 2012 Annual Report.

Clive Watson

Group Finance Director

Responsibility statement of the directors in respect of the Interim report

We confirm that to the best of our knowledge:

·      the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

·      the interim management report includes a fair review of the information required by:

a)   DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

b)   DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

The directors of Spectris plc are as listed in the 2012 report and accounts.

 By order of the Board

John Hughes

Chairman

26 July 2013

Independent Review Report to Spectris plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 which comprises the Condensed Consolidated Statement of Income, Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated Statement of Changes in Equity, Condensed Consolidated Statement of Financial Position, Condensed Consolidated Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.

Richard Broadbelt

for and on behalf of KPMG Audit Plc

Chartered Accountants

15 Canada Square

London

E14 5GL

26 July 2013

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2013

							2013	2012	2012
						Half year		Half year	Full year
								Restated	Restated
Note						£m		£m	£m
	Continuing operations
3	Revenue					570.4		596.7	1,230.8
	Cost of sales					(242.6)		(252.9)	(518.0)
	Gross profit					327.8		343.8	712.8
	Indirect production and engineering expenses					(49.1)		(47.5)	(95.4)
	Sales and marketing expenses					(137.2)		(133.9)	(265.3)
	Administrative expenses					(75.6)		(83.0)	(156.1)
	Operating profit before acquisition-related items					80.9		98.0	228.4
	Net acquisition-related costs and contingent consideration fair value adjustments					(0.2)		(0.4)	(0.9)
	Acquisition-related fair value adjustments to inventory					-		(4.3)	(4.5)
	Amortisation of acquisition-related intangible assets					(14.8)		(13.9)	(27.0)
2,3	Operating profit					65.9		79.4	196.0
4	Profit on disposal of businesses					98.4		-	-
6	Financial income					3.0		4.9	7.5
6	Finance costs					(12.5)		(9.5)	(18.3)
	Profit before tax					154.8		74.8	185.2
7	Taxation - UK					(0.9)		(1.9)	(4.1)
7	Taxation - Overseas					(46.8)		(15.6)	(40.9)
	Profit after tax for the period from continuing operations attributable to owners of the parent company					107.1		57.3	140.2
9	Basic earnings per share					90.9p		49.0p	119.7p
9	Diluted earnings per share					90.4p		48.4p	118.3p
10	Dividends proposed for the period (per share)					14.75p		13.50p	39.00p
10	Dividends paid during the period (per share)					25.50p		25.40p	38.90p

Spectris uses adjusted figures as key performance measures in addition to those reported under adopted IFRS.  Reconciliations showing how the adjusted performance measures are derived from those reported under adopted IFRS are set out in Note 2 together with an explanation of why these measures are used.

Details of the restatement are disclosed in Note 1.

CONDENSED Consolidated statement OF COMPREHENSIVE INCOME

For the six months ended 30 June 2013

	2013	2012	2012
	Half year	Half year	Full year
		Restated	Restated
	£m	£m	£m
Profit for the period attributable to owners of the parent company	107.1	57.3	140.2
Other comprehensive income:
Items that will not be reclassified to the consolidated income statement:
Remeasurement of defined benefit liability/(asset), net of foreign exchange	7.2	0.7	2.3
Tax on items above	(1.8)	-	(0.6)
	5.4	0.7	1.7
Items that are or may be reclassified subsequently to the consolidated income statement:
Net (loss)/gain on effective portion of changes in fair value of forward exchange contracts	(1.4)	1.5	3.8
Foreign exchange movements on translation of overseas operations	48.7	(15.8)	(26.3)
Currency translation differences transferred to profit on disposal	(1.5)	-	-
Net (loss)/gain on changes in fair value of effective portion of hedges of net investment in overseas operations	(8.6)	3.5	4.9
Tax on items above	0.3	(0.3)	(1.0)
	37.5	(11.1)	(18.6)
Total comprehensive income for the period attributable to owners of the parent company	150.0	46.9	123.3

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2013	Share capital	Share premium	Retained earnings	Translation reserve	Hedging reserve	Merger reserve	Capital redemption reserve	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2013	6.2	231.4	400.5	50.4	(0.8)	3.1	0.3	691.1
Impact of change in accounting policy	-	-	0.5	-	-	-	-	0.5
Restated balance as 1 January 2013	6.2	231.4	401.0	50.4	(0.8)	3.1	0.3	691.6
Profit for the period	-	-	107.1	-	-	-	-	107.1
Other comprehensive income:
Net loss on effective portion of changes in fair value of forward exchange contracts, net of tax	-	-	-	-	(1.1)	-	-	(1.1)
Foreign exchange movements on translation of overseas operations	-	-	-	48.7	-	-	-	48.7
Net loss on changes in fair value of effective portion of hedges of net investment in overseas operations, net of tax	-	-	-	(8.6)	-	-	-	(8.6)
Currency translation differences transferred to profit on disposal				(1.5)				(1.5)
Remeasurement of defined benefit liability/(asset), net of foreign exchange and tax	-	-	5.4	-	-	-	-	5.4
Total comprehensive income for the period	-	-	112.5	38.6	(1.1)	-	-	150.0
Distributions to and transactions with owners:
Equity dividends paid	-	-	(30.2)	-	-	-	-	(30.2)
Share-based payments, net of tax	-	-	2.1	-	-	-	-	2.1
Share options exercised from own shares (treasury) purchased	-	-	0.1	-	-	-	-	0.1
Balance at 30 June 2013	6.2	231.4	485.5	89.0	(1.9)	3.1	0.3	813.6
	Share capital	Share premium	Retained earnings	Translation reserve	Hedging reserve	Merger reserve	Capital redemption reserve	Total equity
For the six months ended 30 June 2012 - Restated	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2012, as previously reported	6.2	231.4	295.0	71.8	(3.6)	3.1	0.3	604.2
Impact of change in accounting policy	-	-	(0.6)	-	-	-	-	(0.6)
Restated balance as 1 January 2012	6.2	231.4	294.4	71.8	(3.6)	3.1	0.3	603.6
Profit for the period	-	-	57.3	-	-	-	-	57.3
Other comprehensive income:
Net gain on effective portion of changes in fair value of forward exchange contracts, net of tax	-	-	-	-	1.2	-	-	1.2
Foreign exchange movements on translation of overseas operations	-	-	-	(15.8)	-	-	-	(15.8)
Net gain on changes in fair value of effective portion of hedges of net investment in overseas operations, net of tax	-	-	-	3.5	-	-	-	3.5
Remeasurement of defined benefit liability/(asset), net of foreign exchange and tax	-	-	0.7	-	-	-	-	0.7
Total comprehensive income for the period	-	-	58.0	(12.3)	1.2	-	-	46.9
Distributions to and transactions with owners:
Equity dividends paid	-	-	(29.8)	-	-	-	-	(29.8)
Share-based payments, net of tax	-	-	3.9	-	-	-	-	3.9
Share options exercised from own shares (treasury) purchased	-	-	0.2	-	-	-	-	0.2
Balance at 30 June 2012	6.2	231.4	326.7	59.5	(2.4)	3.1	0.3	624.8

	Share capital	Share premium	Retained earnings	Translation reserve	Hedging reserve	Merger reserve	Capital redemption reserve	Total equity
For the year ended 31 December 2012 - Restated	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2012, as previously reported	6.2	231.4	295.0	71.8	(3.6)	3.1	0.3	604.2
Impact of change in accounting policy	-	-	(0.6)	-	-	-	-	(0.6)
Restated balance at 1 January 2012	6.2	231.4	294.4	71.8	(3.6)	3.1	0.3	603.6
Profit for the period	-	-	140.2	-	-	-	-	140.2
Other comprehensive income:
Net gain on effective portion of changes in fair value of forward exchange contracts, net of tax	-	-	-	-	2.8	-	-	2.8
Foreign exchange movements on translation of overseas operations	-	-	-	(26.3)	-	-	-	(26.3)
Net gain on changes in fair value of effective portion of hedges of net investment in overseas operations, net of tax	-	-	-	4.9	-	-	-	4.9
Remeasurement of defined benefit liability/(asset), net of foreign exchange and tax	-	-	1.7	-	-	-	-	1.7
Total comprehensive income for the period	-	-	141.9	(21.4)	2.8	-	-	123.3
Distributions to and transactions with owners:
Equity dividends paid	-	-	(45.6)	-	-	-	-	(45.6)
Share-based payments, net of tax	-	-	9.8	-	-	-	-	9.8
Share options exercised from own shares (treasury) purchased	-	-	0.5	-	-	-	-	0.5
Balance at 31 December 2012	6.2	231.4	401.0	50.4	(0.8)	3.1	0.3	691.6

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2013

		2013	2012	2012
		Half year	Half year	Full year
			Restated	Restated
Note		£m	£m	£m
	ASSETS
	Non-current assets
	Intangible assets:
	Goodwill	552.7	528.3	526.7
	Other intangible assets	189.3	191.0	191.5
		742.0	719.3	718.2
	Property, plant and equipment	160.6	152.1	152.5
	Equity-accounted investments	-	0.5	0.6
	Deferred tax assets	16.8	20.7	16.8
8	Retirement benefit assets	11.3	-	3.9
		930.7	892.6	892.0
	Current assets
	Inventories	176.2	184.1	163.8
	Taxation recoverable	0.7	5.0	6.2
	Trade and other receivables	215.8	205.5	208.8
	Derivative financial instruments	1.1	-	2.4
	Cash and cash equivalents	36.0	28.8	40.8
		429.8	423.4	422.0
	Assets held for sale	-	-	17.6
		429.8	423.4	439.6
	Total assets	1,360.5	1,316.0	1,331.6
	LIABILITIES
	Current liabilities
	Short-term borrowings	(88.5)	(2.3)	(82.8)
	Derivative financial instruments	(11.9)	(0.6)	(12.5)
	Trade and other payables	(207.2)	(209.3)	(207.9)
	Current tax liabilities	(51.2)	(47.1)	(29.7)
	Provisions	(25.4)	(29.7)	(26.4)
		(384.2)	(289.0)	(359.3)
	Liabilities held for sale	-	-	(9.2)
		(384.2)	(289.0)	(368.5)
	Net current assets	45.6	134.4	71.1
	Non-current liabilities
	Medium- and long-term borrowings	(92.7)	(346.1)	(200.3)
	Derivative financial instruments	-	(10.3)	-
	Other payables	(20.1)	(10.7)	(19.7)
8	Retirement benefit obligations	(15.7)	(11.7)	(15.3)
	Deferred tax liabilities	(34.2)	(23.4)	(36.2)
		(162.7)	(402.2)	(271.5)
	Total liabilities	(546.9)	(691.2)	(640.0)
	Net assets	813.6	624.8	691.6
	EQUITY
	Issued share capital	6.2	6.2	6.2
	Share premium	231.4	231.4	231.4
	Retained earnings	485.5	326.7	401.0
	Translation reserve	89.0	59.5	50.4
	Hedging reserve	(1.9)	(2.4)	(0.8)
	Merger reserve	3.1	3.1	3.1
	Capital redemption reserve	0.3	0.3	0.3
	Total equity attributable to equity holders of the parent company	813.6	624.8	691.6
	Total equity and liabilities	1,360.5	1,316.0	1,331.6

CONDENSED Consolidated statement OF cash flowS

For the six months ended 30 June 2013

		2013	2012	2012
		Half year	Half Year	Full Year
			Restated	Restated
Note		£m	£m	£m
	Cash flows from operating activities
	Profit after tax	107.1	57.3	140.2
	Adjustments for:
7	Tax	47.7	17.5	45.0
4	Profit on disposal of businesses	(98.4)	-	-
6	Finance costs	12.5	9.5	18.3
6	Financial income	(3.0)	(4.9)	(7.5)
	Depreciation	9.1	8.5	17.5
	Amortisation of intangible assets	16.5	15.4	30.1
5	Acquisition-related fair value adjustments to inventory	-	4.3	4.5
4	Loss/(gain) on sale of property, plant and equipment	0.1	-	(0.1)
	Acquisition costs not yet paid	-	-	0.2
	Equity-settled share-based payment transactions	2.0	3.9	6.2
	Operating profit before changes in working capital and provisions	93.6	111.5	254.4
	Decrease/(increase) in trade and other receivables	2.8	14.7	(1.2)
	Increase in inventories	(4.0)	(14.3)	(1.7)
	Decrease in trade and other payables	(9.3)	(13.9)	(5.5)
	Decrease in provisions and employee benefits	(2.7)	(2.3)	(6.2)
	Income tax paid	(28.6)	(21.4)	(52.6)
	Net cash generated from operating activities	51.8	74.3	187.2
	Cash flows from investing activities
	Purchase of property, plant and equipment and software	(13.6)	(12.4)	(28.8)
	Proceeds from sale of property, plant and equipment	0.5	0.2	2.2
5	Acquisition of businesses, net of cash acquired	(1.2)	(4.9)	(15.5)
4	Proceeds from disposal of businesses, net of cash disposed	106.1	-	-
	Interest received	0.2	0.5	0.5
	Net cash flows generated from/(used in) investing activities	92.0	(16.6)	(41.6)
	Cash flows from financing activities
	Interest paid	(4.8)	(6.4)	(12.0)
	Dividends paid	(30.2)	(29.8)	(45.6)
	Proceeds from exercise of share options (treasury shares)	0.1	0.2	0.5
	Repayment of borrowings	(116.1)	(33.6)	(87.1)
	Net cash flows used in financing activities	(151.0)	(69.6)	(144.2)
	Net (decrease)/increase in cash and cash equivalents	(7.2)	(11.9)	1.4
	Cash and cash equivalents at beginning of year	39.8	40.5	40.5
	Effect of foreign exchange rate changes	2.6	0.2	(2.1)
	Cash and cash equivalents at end of period	35.2	28.8	39.8

	CONDENSED Consolidated statement OF cash flowS continued For the six months ended 30 June 2013
		Reconciliation of changes in cash and cash equivalents to	2013 Half year	2012 Half year	2012 Full year
		movements in net debt	£m	£m	£m
		Net (decrease)/increase in cash and cash equivalents	(7.2)	(11.9)	1.4
		Repayment of borrowings	116.1	33.6	87.1
		Effect of foreign exchange rate changes	(11.6)	5.5	13.6
		Movement in net debt	97.3	27.2	102.1
		Net debt at start of period	(254.1)	(356.2)	(356.2)
		Net debt at end of period	(156.8)	(329.0)	(254.1)

NOTES TO THE INTERIM FINANCIAL STATEMENTS

1.  PrincipAL accounting policies and basis of preparation

Spectris plc is a public limited company incorporated and domiciled in the United Kingdom, whose shares are publicly traded on the London Stock Exchange.

The condensed consolidated interim financial statements of the company for the six months ended
30 June 2013 comprise the company and its subsidiaries, together referred to as the 'group'. These condensed consolidated interim financial statements are presented in millions of pounds sterling rounded to the nearest one decimal place. The consolidated financial statements of the group for the year ended 31 December 2012 are available upon request from the company's registered office at Heritage House, Church Road, Egham, Surrey TW20 9QD.

These condensed consolidated interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim Financial Reporting', as adopted by the European Union. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the group for the year ended 31 December 2012.

Having made enquiries and reviewed the group's plans and available financial facilities, the Board has a reasonable expectation that the group has adequate resources to continue its operational existence for the foreseeable future. For this reason, it continues to adopt the going concern basis in preparing the condensed consolidated interim financial statements. There are no key sensitivities identified in relation to this conclusion.

Except as described below, the accounting policies applied by the group in these condensed consolidated interim financial statements are the same as those applied by the group in its consolidated financial statements for the year ended 31 December 2012.

The group has adopted IAS 19 (Revised) 'Employee Benefits' as of 1 January 2013.  As a result 2012 comparatives have been restated to reflect what they would have been under this revised standard.  The principal changes require the replacement of the expected return on plan assets and the interest charge on pension liabilities with a single net financing cost based on the discount rate and also to amend the presentation of the costs of managing plan assets to include them within the administrative expenses.

The group has adopted IFRS 13 'Fair Value Measurement' as of 1 January 2013 which replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7 'Financial Instruments: Disclosures'. Some of the disclosures are specifically required in interim financial statements for financial instruments, and accordingly, the group has included additional disclosures in this regard (see Note 12).

As a result of the amendment to IAS 1 in relation to the presentation of items of other comprehensive income, the group has modified the presentation of items of other comprehensive income in its condensed consolidated statement of other comprehensive income, to present separately items that would be reclassified to the consolidated income statement in the future from those that would never be.  Comparative information has also been re-presented accordingly.  The adoption of IAS 1 has had no impact on the recognised assets, liabilities and comprehensive income of the group.

The following tables summarise the effect of the adoption of IAS 19 (Revised) on the group's consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position and consolidated statement of cash flows.

					2012	2012
					Half year	Full year
Impact on consolidated income statement					£m	£m
Administrative expenses					-	(0.5)
Finance income					(0.6)	(1.0)
Tax credit on above					0.1	0.4
Overall decrease in profit for the period					(0.5)	(1.1)

					2012	2012
					Half year	Full year
Impact on consolidated statement of comprehensive income					£m	£m
Profit for the period attributable to owners of the parent company					(0.5)	(1.1)
Remeasurement of the defined benefit liability/(asset), net of foreign exchange					0.6	2.7
Tax charge on items that will not be reclassified to profit or loss					-	(0.5)
Overall increase in other comprehensive income					0.1	1.1

					2012	2012
					Half year	Full year
Impact on consolidated statement of financial position					£m	£m
Deferred tax asset					0.1	(0.1)
Retirement benefit obligations					(0.6)	0.6
Overall (decrease)/increase in retained earnings					(0.5)	0.5

					2012	2012
					Half year	Full year
Impact on consolidated statement of cash flows					£m	£m
Profit after tax					(0.5)	(1.1)
Tax					(0.1)	(0.4)
Financial income					0.6	1.0
Increase in provisions and employee benefits					-	0.5
Overall impact on cash flow					-	-

The condensed consolidated interim financial statements for the six-month period ending 30 June 2013 are unaudited but have been subject to an independent review by the auditor. They do not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. The comparative figures for the financial year ended 31 December 2012 are derived from the company's statutory accounts for that financial year, except where restated under IAS19 (Revised). Those accounts have been reported on by the company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

The preparation of interim financial statements in conformity with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated statements for the year ended 31 December 2012.

The directors have considered the circumstances as at 30 June 2013 and concluded that there are no indicators of impairments that require an impairment review to be undertaken at the interim balance sheet date. The annual impairment review will be undertaken later in 2013 consistent with the timing in previous years.

The group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements for the year ended 31 December 2012.

These condensed consolidated interim financial statements were approved by the Board of Directors on 26 July 2013.

As in prior years, the group's revenue and operating profits are expected to be weighted towards the second half of the year.

2.  ADJUSTED PERFORMANCE MEASURES

Spectris uses adjusted figures as key performance measures in addition to those reported under adopted IFRS, as management believes these measures enable them to assess the underlying trading performance of the businesses. Adjusted figures exclude certain non-operational items which management has defined as amortisation and impairment of acquisition-related intangible assets, acquisition-related costs and contingent consideration fair value adjustments, acquisition-related fair value adjustment to inventory, profits or losses on termination or disposal of businesses, unrealised changes in the fair value of financial instruments, gains or losses on retranslation of short-term inter-company loan balances, related tax effects and other tax items which do not form part of the underlying tax rate.

				2013 Half year	2012 Half year	2012 Full year
Note	Sales			£m	£m	£m
	Sales as reported under adopted IFRS		570.4		596.7	1,230.8
4	Divested businesses			(4.2)	(26.2)	(53.6)
	Sales excluding divested businesses		566.2		570.5	1,177.2

		Materials Analysis		Test and Measurement	In-line Instrumentation	Industrial Controls	2013 Half year Total
Note	Sales by segment - June 2013		£m	£m	£m	£m	£m
	Sales as reported under adopted IFRS		166.5	162.1	130.6	111.2	570.4
4	Divested businesses		-	-	(4.2)	-	(4.2)
	Sales excluding divested businesses		166.5	162.1	126.4	111.2	566.2

		Materials Analysis		Test and Measurement	In-line Instrumentation	Industrial Controls	2012 Half year Total
Note	Sales by segment - June 2012		£m	£m	£m	£m	£m
	Sales as reported under adopted IFRS		166.1	164.6	154.8	111.2	596.7
4	Divested businesses		-	-	(26.2)	-	(26.2)
	Sales excluding divested businesses		166.1	164.6	128.6	111.2	570.5

		Materials Analysis		Test and Measurement	In-line Instrumentation	Industrial Controls	2012 Full year Total
Note	Sales by segment - December 2012		£m	£m	£m	£m	£m
	Sales as reported under adopted IFRS		348.1	345.4	320.1	217.2	1,230.8
4	Divested businesses		-	-	(53.6)	-	(53.6)
	Sales excluding divested businesses		348.1	345.4	266.5	217.2	1,177.2

The following is an analysis of revenue by geographical destination excluding divested businesses.

			2013 Half year	2012 Half year	2012 Full year
			£m	£m	£m
UK			18.3	18.6	38.0
Germany			57.4	56.3	118.6
France			21.9	20.1	42.2
Rest of Europe			83.6	81.7	169.1
USA			164.7	169.3	337.0
Rest of North America			17.5	18.9	39.4
Japan			28.1	36.6	76.2
China			73.8	72.1	150.3
South Korea			15.0	17.5	33.6
Rest of Asia Pacific			47.5	45.9	97.5
Rest of the world			38.4	33.5	75.3
			566.2	570.5	1,177.2

					2013		2012		2012
					Half year		Half year		Full year
									Restated
Note	Adjusted operating profit				£m		£m		£m
	Operating profit as reported under adopted IFRS				65.9		79.4		196.0
	Net acquisition-related costs and contingent consideration fair value adjustments				0.2		0.4		0.9
5	Acquisition-related fair value adjustments to inventory				-		4.3		4.5
	Amortisation of acquisition-related intangible assets				14.8		13.9		27.0
3	Adjusted operating profit				80.9		98.0		228.4
4	Divested businesses				(0.8)		(5.2)		(11.5)
	Adjusted operating profit excluding divested businesses				80.1		92.8		216.9
Note		Materials Analysis		Test and Measurement		In-line Instrumentation		Industrial Controls		2013 Half year Total
	Adjusted operating profit by segment - June 2013		£m	£m		£m		£m		£m
	Operating profit as reported under adopted IFRS		16.6	14.3		20.4		14.6		65.9
	Net acquisition-related costs and contingent consideration fair value adjustments		-	-		-		0.2		0.2
	Amortisation of acquisition-related intangible assets		4.0	2.7		1.4		6.7		14.8
3	Adjusted operating profit: segment result		20.6	17.0		21.8		21.5		80.9
4	Divested businesses		-	-		(0.8)		-		(0.8)
	Adjusted operating profit excluding divested businesses: segment result		20.6	17.0		21.0		21.5		80.1

Note		Materials Analysis		Test and Measurement	In-line Instrumentation	Industrial Controls	2012 Half year Total
	Adjusted operating profit by segment - June 2012		£m	£m	£m	£m	£m
	Operating profit as reported under adopted IFRS		21.7	20.7	25.0	12.0	79.4
	Net acquisition-related costs and contingent consideration fair value adjustments		0.1	-	0.1	0.2	0.4
	Acquisition-related fair value adjustments to inventory		-	-	-	4.3	4.3
	Amortisation of acquisition-related intangible assets		3.3	2.6	1.3	6.7	13.9
3	Adjusted operating profit: segment result		25.1	23.3	26.4	23.2	98.0
4	Divested businesses		-	-	(5.2)	-	(5.2)
	Adjusted operating profit excluding divested businesses: segment result		25.1	23.3	21.2	23.2	92.8

Note		Materials Analysis		Test and Measurement	In-line Instrumentation	Industrial Controls	2012 Full year Total
	Adjusted operating profit by segment - December 2012 - Restated		£m	£m	£m	£m	£m
	Operating profit as reported under adopted IFRS		56.9	50.1	60.6	28.4	196.0
	Net acquisition-related costs and contingent consideration fair value adjustments		0.1	0.1	0.3	0.4	0.9
	Acquisition-related fair value adjustments to inventory		-	-	0.2	4.3	4.5
	Amortisation of acquisition-related intangible assets		6.0	5.2	2.7	13.1	27.0
3	Adjusted operating profit: segment result		63.0	55.4	63.8	46.2	228.4
4	Divested businesses		-	-	(11.5)	-	(11.5)
	Adjusted operating profit excluding divested businesses: segment result		63.0	55.4	52.3	46.2	216.9

Return on sales by segment - June 2013	Materials Analysis			Test and Measurement	In-line Instrumentation	Industrial Controls	2013 Half year Total
Using operating profit as reported under adopted IFRS		10.0%		8.8%	15.6%	13.1%	11.6%
Using adjusted operating profit			12.4%	10.5%	16.7%	19.4%	14.2%
Using adjusted operating profit excluding divested businesses			12.4%	10.5%	16.6%	19.4%	14.1%
Return on sales by segment - June 2012	Materials Analysis			Test and Measurement	In-line Instrumentation	Industrial Controls	2012 Half year Total
Using operating profit as reported under adopted IFRS		13.1%		12.6%	16.1%	10.8%	13.3%
Using adjusted operating profit			15.1%	14.2%	17.0%	20.8%	16.4%
Using adjusted operating profit excluding divested businesses			15.1%	14.2%	16.5%	20.8%	16.3%

Return on sales by segment - December 2012 - Restated	Materials Analysis			Test and Measurement	In-line Instrumentation	Industrial Controls	2012 Full year Total
Using operating profit as reported under adopted IFRS		16.3%		14.5%	18.9%	13.1%	15.9%
Using adjusted operating profit			18.1%	16.0%	19.9%	21.3%	18.6%
Using adjusted operating profit excluding divested businesses			18.1%	16.0%	19.6%	21.3%	18.4%

						2013		2012	2012
Note						Half year		Half year	Full year
	Reconciliation to adjusted profit before tax and adjusted							Restated	Restated
	operating profit					£m		£m	£m
	Profit before tax as reported under adopted IFRS					154.8		74.8	185.2
	Add/(deduct):
	Net acquisition-related costs and contingent consideration fair value adjustments				0.2			0.4	0.9
	Acquisition-related fair value adjustments to inventory				-			4.3	4.5
	Amortisation of acquisition-related intangible assets				14.8			13.9	27.0
6	Net loss/(gain) on retranslation of short-term inter-company loan balances					4.8		(1.4)	(0.9)
4	Profit on disposal of businesses					(98.4)		-	-
6	Increase in fair value of cross-currency interest rate swaps					(0.4)		(0.6)	(0.9)
	Adjusted profit before tax					75.8		91.4	215.8
	Adjusted net finance costs (see below)					5.1		6.6	12.6
	Adjusted operating profit					80.9		98.0	228.4
	Divested businesses (net of finance costs)					(0.8)		(5.2)	(11.5)
	Adjusted operating profit excluding divested businesses					80.1		92.8	216.9
						2013		2012	2012
						Half year		Half year	Full year
								Restated	Restated
	Adjusted net finance costs					£m		£m	£m
	Net finance costs as reported under adopted IFRS					(9.5)		(4.6)	(10.8)
	Increase in fair value of cross-currency interest rate swaps					(0.4)		(0.6)	(0.9)
	Net losses/(gains) on retranslation of short-term inter-company loan balances					4.8		(1.4)	(0.9)
	Adjusted net finance costs					(5.1)		(6.6)	(12.6)
	Divested businesses					-		-	-
	Adjusted net finance costs excluding divested businesses					(5.1)		(6.6)	(12.6)
						2013		2012	2012
						Half year		Half year	Full year
	Adjusted operating cash flow					£m		£m	£m
	Net cash from operating activities under adopted IFRS					51.8		74.3	187.2
	Acquisition-related costs paid						0.4	0.4	0.7
	Income tax paid						28.6	21.4	52.6
	Purchase of property, plant and equipment and software						(13.6)	(12.4)	(28.8)
	Proceeds from sale of property, plant and equipment					0.5		0.2	2.2
	Adjusted operating cash flow					67.7		83.9	213.9
	Divested businesses					(2.6)		(5.1)	(9.1)
	Adjusted operating cash flow excluding divested businesses					65.1		78.8	204.8
						2013 Half year		2012 Half year	2012 Full year
								Restated	Restated
Note	Adjusted earnings per share					£m		£m	£m
	Profit after tax as reported under adopted IFRS		107.1					57.3	140.2
	Adjusted for:
	Net acquisition-related costs and contingent consideration fair value adjustments		0.2					0.4	0.9
5	Acquisition-related fair value adjustments to inventory		-					4.3	4.5
	Amortisation of acquisition-related intangible assets		14.8					13.9	27.0
4	Profit on disposal of businesses		(98.4)					-	-
6	Increase in fair value of cross-currency interest rate swaps		(0.4)					(0.6)	(0.9)
6	Net loss/(gains) on retranslation of short-term inter-company loan balances		4.8					(1.4)	(0.9)
7	Tax effect of the above and other non-recurring items			29.4				(6.3)	(10.8)
	Adjusted earnings			57.5				67.6	160.0
	Profit after tax on divested businesses			(0.5)				(3.3)	(7.4)
	Adjusted earnings excluding divested businesses			57.0				64.3	152.6
	Weighted average number of shares outstanding (millions)			117.8				116.9	117.1
	Adjusted earnings per share (pence)					48.8		57.8	136.6
	Adjusted earnings per share excluding divested businesses (pence)					48.4		54.9	130.3

				2013	2012	2012
				Half year	Half year	Full year
	Adjusted diluted earnings per share				Restated	Restated
9	Diluted weighted average number of shares outstanding (millions)			118.5	118.3	118.5
	Adjusted diluted earnings per share (pence)		48.5		57.1	135.0
	Adjusted diluted earnings per share excluding divested businesses (pence)		48.1		54.3	128.8

Basic and diluted earnings per share in accordance with IAS 33 are disclosed in Note 9.

				2013	2012	2012
				Half year	Half year	Full year
Analysis of net debt for management purposes				£m	£m	£m
Bank overdrafts				0.8	0.9	1.0
Bank loans - secured				-	1.7	-
Bank loans - unsecured				93.0	261.8	200.3
Unsecured loan notes				87.4	84.0	81.8
Cross-currency interest rate swaps - currency portion			11.6		9.4	11.8
Total borrowings				192.8	357.8	294.9
Cash balances				(36.0)	(28.8)	(40.8)
Net debt				156.8	329.0	254.1

3.  OPERATING SEGMENTS

The group has four reportable segments, as described below, which are the group's strategic business units.  These units offer different applications, assist companies at various stages of the production cycle and are focused towards specific industries. These segments reflect the internal reporting provided to the chief operating decision maker (considered to be the Board) on a regular basis. 
The following summary describes the operations in each of the group's reportable segments.

·     Materials Analysis provides products that enable customers to determine structure, composition, quantity and quality of particles and materials, during their R&D process, when assessing raw materials before production, or during the manufacturing process. Our key customers are leaders in academic research, mining, cement, pharmaceutical, chemical and electronics industries.

·     Test and Measurement supplies test, measurement and analysis equipment and software for product design optimisation, manufacturing control, and environmental monitoring systems. Markets are principally the aerospace, automotive and consumer electronics industries.

·     In-line Instrumentation provides process analytical measurement, asset monitoring and on-line controls for both primary processing and the converting industries. Our key customers are in the electronics, petrochemicals, oil and gas, pulp and paper, energy, manufacturing, automotive and medical industries.

·     Industrial Controls provides products and solutions that measure, monitor, control, inform, track and trace during the production process. Our key customers include industrial manufacturing, automotive, electronics, packaging, and life sciences.

	Reportable segment revenue			Reportable segment profit
	2013	2012	2012	2013	2012	2012
	Half year	Half year	Full year	Half year	Half year	Full year
Information about reportable					Restated	Restated
segments	£m	£m	£m	£m	£m	£m
Materials Analysis	166.5	166.1	348.1	20.6	25.1	63.0
Test and Measurement	162.1	164.6	345.4	16.9	23.3	55.4
In-line Instrumentation	130.6	154.8	320.1	21.8	26.4	63.8
Industrial Controls	111.2	111.2	217.2	21.6	23.2	46.2
Total continuing operations	570.4	596.7	1,230.8	80.9	98.0	228.4
Net acquisition-related costs and contingent consideration fair value adjustments				(0.2)	(0.4)	(0.9)
Acquisition-related fair value adjustments to inventory				-	(4.3)	(4.5)
Amortisation of acquisition-related intangibles				(14.8)	(13.9)	(27.0)
Operating profit				65.9	79.4	196.0
Profit on disposal of businesses*				98.4	-	-
Financial income*				3.0	4.9	7.5
Finance costs*				(12.5)	(9.5)	(18.3)
Profit before tax				154.8	74.8	185.2
Income tax*				(47.7)	(17.5)	(45.0)
Profit after tax				107.1	57.3	140.2

* Not allocated to reportable segments in reporting to the Chief Operating Decision Maker.

The reportable segment revenue disclosed above is for external customers only.  Inter-segment revenue is not disclosed separately as it is not material.

Reportable segment profit is consistent with that presented to the Chief Operating Decision Maker.

A table of segmental assets and liabilities is not disclosed as there are no material changes compared to 31 December 2012.

Geographical segments

The group's operating segments are each located in several geographical locations and sell on to external customers in all parts of the world.  No individual country amounts to more than 3% of turnover, other than those noted below.

The following is an analysis of revenue by geographical destination.

			2013 Half year	2012 Half year	2012 Full year
			£m	£m	£m
UK			18.3	18.9	38.6
Germany			57.5	56.7	119.4
France			21.9	20.1	42.2
Rest of Europe			83.6	83.0	171.5
USA			166.1	175.8	349.7
Rest of North America			17.6	19.3	40.2
Japan			29.2	44.4	92.4
China			74.4	76.2	162.6
South Korea			15.2	20.8	37.6
Rest of Asia Pacific			48.2	47.0	100.2
Rest of the world			38.4	34.5	76.4
			570.4	596.7	1,230.8

4.  DISPOSAL OF BUSINESSES

In line with the agreement signed on 18 December 2012, on 31 January 2013, Spectris disposed of the Fusion business for a final consideration of US$175m.

Effect of disposal on the financial					2013 Half year
position of the group					£m
Other intangible assets					0.3
Property, plant and equipment					0.9
Deferred tax assets					0.5
Inventory					5.1
Trade and other receivables					8.1
Cash					1.8
Trade and other payables					(5.6)
Current tax liabilities					(0.6)
Provisions					(0.2)
Net assets and liabilities					10.3
Consideration received, satisfied in cash					110.2
Cash disposed of					(1.8)
Transaction expenses					(3.0)
Net cash inflow					105.4
Cash received net of transaction expenses					107.2
Net assets disposed of					(10.3)
Currency translation differences transferred from translation reserve					1.5
Profit on disposal of businesses					98.4

The sale of the Fusion business did not meet the definition of a discontinued operation under IFRS 5 'Non-Current Asset Held for Sale and Discontinued Operations' and therefore, no disclosures in relation to discontinued operations have been made.

The group did not divest any businesses during 2012.

Disposal of associate

On 19 February 2013, the group acquired certain trade and assets that resulted in a deemed disposal of its 31.2% associate investment in Naneum Limited for £0.7m in cash. The group's share of the associate's results up to the date of disposal and the gain/(loss) on disposal was not material.

5.  ACQUISITIONS

On 19 February 2013, the group acquired certain of the trade and assets of a previously held associate company, Naneum Ltd, a company based in the UK, for a total consideration of £1.3m, including £0.5m contingent consideration which is the expected royalty payments based on 6% of expected sales over a seven year period. This extends the group's capabilities in aerosol monitoring instruments. The excess of the fair value of the consideration paid over the fair value of the net tangible assets acquired is represented by a technology-based intangible asset of £1.3m. This business has been integrated into the Materials Analysis segment.

Acquisition-related costs of £0.2m (30 June 2012: £0.4m; 31 December 2012: £0.9m) have been recognised in the consolidated income statement under IFRS 3 (Revised) 'Business Combinations' and included within administrative expenses.  Acquisition-related costs have been excluded from the adjusted operating profit and acquisition costs paid of £0.4m have been excluded from adjusted operating cash flows (see Note 2).

The assets and liabilities acquired during the period, together with the aggregate purchase consideration, are summarised below.  The fair values disclosed are provisional, reflecting the timing of the acquisition, and are expected to be finalised within 12 months of the acquisition date.

			Book value	Adjustments	2013 Half year Fair value
Net assets acquired			£m	£m	£m
Intangible fixed assets			-	1.3	1.3
Net assets acquired			-	1.3	1.3
Goodwill					-
Total consideration in relation to half year 2013 acquisition					1.3
Analysis of cash outflow in consolidated statement of cash flows
Total consideration in relation to half year 2013 acquisition					1.3
Deferred and contingent consideration on 2013 acquisition to be paid in future years				(0.3)	(0.5)
Cash paid in 2013 in relation to half year 2013 acquisition					0.8
Acquisitions prior to 2013:
Purchase price adjustment re prior year acquisitions					(0.1)
Deferred and contingent consideration in relation to prior years' acquisitions:
Accrued at 31 December 2012					0.5
Cash paid in 2013 in respect of prior years' acquisitions					0.4
Net cash outflow in relation to half year 2013					1.2

During the full year 2012, the group acquired the following businesses:

·     On 21 February 2012, the group acquired certain of the trade and assets of DCM Industries, a company based in the USA, which extended the group's capabilities in cable testing equipment.

·     On 6 August 2012, the group acquired 100% of the share capital of NoVisim Limited, a company based in the UK, which extended the group's capabilities in noise and vibration test-based simulation software for the automotive industry.

·     On 14 December 2012, the group acquired 100% of the share capital of Analytical Spectral Devices Inc., a company based in the USA, which extends the group's capabilities into near-infrared (NIR) instrumentation solutions and application expertise for material measurement and research.

Full details of these acquisitions are included in the consolidated financial statements for the year ended 31 December 2012. There have been no changes to previously recognised fair values in the period in relation to these acquisitions.

6.  FINANCIAL INCOME AND FINANCE COSTS

				2013	2012	2012
				Half year	Half year	Full year
					Restated	Restated
Financial income				£m	£m	£m
Interest receivable				0.2	0.3	0.5
Increase in fair value of cross-currency interest rate swaps				0.4	0.6	0.9
Net gains on retranslation of short-term inter-company loan balances				-	1.4	0.9
Expected return on pension scheme assets				2.4	2.6	5.2
				3.0	4.9	7.5

					2013	2012	2012
					Half year	Half year	Full year
Finance costs					£m	£m	£m
Interest payable on loans and overdrafts					5.1	6.6	12.6
Net loss on retranslation of short term inter-company loan					4.8	-	-
Interest cost on pension scheme liabilities					2.5	2.8	5.7
Other finance costs					0.1	0.1	-
					12.5	9.5	18.3

Net interest costs of £4.9m (30 June 2012: £6.3m; 31 December 2012: £12.1m) for the purposes of the calculation of interest cover comprise of bank interest receivable of £0.2m (30 June 2012: £0.3m;
31 December 2012: £0.5m), and interest payable on loans and overdrafts of £5.1m (30 June 2012: £6.6m; 31 December 2012: £12.6m).

7.  TAX ON PROFIT ON ORDINARY ACTIVITIES

The income tax charge for the six months to 30 June 2013 is based on an estimate of the effective rate of taxation for the current year. The effective rate of taxation applied to adjusted profit before tax for the half year is 24.1% (30 June 2012: 26.0%; Year ended 31 December 2012: 25.9%).  A reconciliation of the tax charge on adjusted profit to the actual tax charge is presented below.

	2013	2012	2012
	Half year	Half year	Full year
		Restated	Restated
	£m	£m	£m
The income tax charge is analysed as follows:
Tax charge on adjusted profit before tax at effective rate	18.3	23.8	55.8
Tax credit on amortisation of intangible assets	(4.8)	(4.8)	(9.1)
Tax charge on unrealised gain on change in fair value of cross-currency interest rate swaps	0.1	0.1	0.2
Tax credit on acquisition-related costs	-	(0.1)	(0.1)
Tax credit on acquisition-related fair value adjustments to inventory	-	(1.7)	(1.6)
Tax charge/(credit) on retranslation of short-term inter-company loan balances	-	0.2	(0.2)
Tax charge on profit on disposal of businesses	34.1	-	-
Total	47.7	17.5	45.0
Included in the above:
Tax charge on profit of divested businesses	0.3	1.9	4.1

8.  RETIREMENT BENEFIT SCHEMES

		2013	2013	2013
Reconciliation of movement in net		UK plans	Overseas plans	Half year total
(surplus)/deficit		£m	£m	£m
At 1 January 2013 - Restated		(3.9)	15.3	11.4
Contributions from sponsoring company		-	(0.7)	(0.7)
Current service cost		0.2	0.6	0.8
Net finance cost of pension scheme		(0.1)	0.2	0.1
Actuarial gains		(7.5)	(0.4)	(7.9)
Foreign exchange difference		-	0.7	0.7
At 30 June 2013		(11.3)	15.7	4.4

		2013	2013	2013
		UK plans	Overseas plans	Half year total
Analysed as:		£m	£m	£m
Retirement scheme surpluses - included in non-current assets		(11.3)	-	(11.3)
Retirement scheme deficits - included in non-current liabilities		-	15.7	15.7
Net (surplus)/deficit in schemes		(11.3)	15.7	4.4

The net retirement benefit scheme deficit as at 30 June 2013 is calculated on a year to date basis, using the latest valuation as at 31 December 2012 and updated to 30 June 2013 for the principal schemes.

9.  Earnings per share

Earnings per share and diluted earnings per share are calculated as follows:

	2013	2012	2012
	Half year	Half year	Full year
Basic earnings per share		Restated	Restated
Profit after tax (£m)	107.1	57.3	140.2
Weighted average number of shares outstanding (millions)	117.8	116.9	117.1
Basic earnings per share (pence)	90.9	49.0	119.7

Basic earnings per share amounts are calculated by dividing net profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period (excluding treasury shares).

The calculation of diluted earnings per share of 90.4p (30 June 2012: 48.4p; 31 December 2012: 118.3p) is based on the group profit of £107.1m (30 June 2012: £57.3m; 31 December 2012: £140.2m) and on the diluted weighted average number of 5p ordinary shares in issue during the period of 118.5 million (30 June 2012: 118.3 million; 31 December 2012: 118.5 million).

10.  DIVIDENDS

The final 2012 dividend of 25.50p per share (2011 final dividend: 25.40p) was paid on 26 June 2013 to ordinary shareholders on the register at the close of business on 31 May 2013.

The interim 2013 dividend of 14.75p per share (2012 interim dividend: 13.50p) will be payable on 8 November 2013 to ordinary shareholders on the register at the close of business on 18 October 2013.

The estimated interim dividend to be paid is £17.5m and has not been recognised in these accounts.

11.  TREASURY SHARES

At 30 June 2013, the group held 6,493,312 treasury shares (30 June 2012: 7,715,803; 31 December 2012: 7,612,379). 1,119,067 of these shares were issued to satisfy options exercised by employees which were granted under the group's share schemes (30 June 2012: 918,261; 31 December 2012: 1,021,685). No shares were repurchased by the group during the period (30 June 2012: nil;
31 December 2012: nil) and no shares were cancelled during the period (30 June 2012: nil;
31 December 2012: nil).

12.  FAIR VALUE OF FINANCIAL INSTRUMENTS

	2013 Half year		2012 Half year		2012 Full Year
Fair value and carrying amount of	Carrying Amount	Fair Value	Carrying Amount	Fair Value	Carrying Amount	Fair Value
financial instruments	£m	£m	£m	£m	£m	£m
Trade and other receivables excluding prepayments	190.5	190.5	191.2	191.2	189.2	189.2
Trade and other payables excluding deferred income	(198.0)	(198.0)	(192.9)	(192.9)	(203.7)	(203.7)
Cash and cash equivalents	36.0	36.0	28.8	28.8	40.8	40.8
Floating rate borrowings	(43.7)	(43.7)	(214.2)	(214.2)	(154.2)	(154.2)
Fixed rate borrowings	(137.5)	(141.6)	(134.2)	(141.0)	(128.9)	(134.7)
Forward exchange contracts	1.1	1.1	(0.6)	(0.6)	2.4	2.4
Cross-currency interest rate swap	(11.9)	(11.9)	(10.3)	(10.3)	(12.5)	(12.5)
	(163.5)	(167.6)	(332.2)	(339.0)	(266.9)	(272.7)

There is no difference in the valuation techniques used or the fair value hierarchy under IFRS 7 'Financial Instruments: Disclosures' from that disclosed in the consolidated financial statements for the year ended 31 December 2012.

13.  RELATED PARTIES

Key management personnel are defined for the purpose of IAS 24 'Related Party Disclosures' as members of the Board of Directors. It is the Board of Directors who have responsibility for planning, directing and controlling the activities of the group.  The latest details of directors' remuneration are included in the directors' remuneration report in the 2012 annual reports and accounts, which is available to the public from the registered office at Heritage House, Church Road, Egham, Surrey TW20 9QD, and on the company's website at www.spectris.com.

 

END

 

 

IR RAMATMBATBRJ