Interim Results
Spectris PLC
24 August 2007
Embargoed until 07.00, Friday 24 August 2007
2007 INTERIM RESULTS
Spectris plc, the precision instrumentation and controls company, announces
interim results for the six months ended 30 June 2007.
2007 2006
Half year Half year Change
Sales from continuing businesses (£m)# 308.7 303.6 +1.7%
Adjusted operating profit from continuing businesses (£m)# * 39.4 31.3 +26%
Adjusted operating profit (£m)# * 39.9 32.7 +22%
Adjusted profit before tax (£m)* 36.8 27.5 +34%
Adjusted earnings per share (pence)* 20.8 15.7 +32%
Dividend (pence) 5.75 5.0 +15%
Statutory
Sales (£m) 317.3 327.3 -3%
Profit before tax (£m) 56.4 36.9 +53%
Basic earnings per share (pence) 33.4 20.7 +61%
# Continuing businesses exclude businesses divested
* For explanation of adjusted figures see Note 2
Highlights
• Sales from continuing businesses up 7.6% at constant exchange rates
• Operating margins improved by 2.5 percentage points to 12.8%
• Strong cash conversion contributing to further reduction in net debt by
£9.6 million to £62.1 million
• Share buy-back: 3.5 million shares purchased for £32.5 million
• Dividend increased by 15%
Commenting on the results, John O'Higgins, Chief Executive, said:
'With sales, profits and operating margins all increasing compared with the
prior year, Spectris has made good progress towards meeting its objectives. We
remain confident of continued improvement consistent with expectations for the
year.'
Chairman's statement
Overview
Spectris delivered increased sales, profits and earnings per share in the first
half of 2007 compared with the corresponding period in 2006, after adjusting for
disposals and acquisitions. Total group sales in the first half were £317.3
million compared with £327.3 million in the prior year. Sales from continuing
businesses increased by 1.7% to £308.7 million (2006: £303.6 million)*. However,
taking into account the weakness of the US dollar and the Japanese yen against
sterling, at constant currencies sales increased by 7.6%. Sales in local
currencies increased across all geographies, reflecting the on-going strong
demand from the global industries which the group serves.
Despite the currency disadvantage, adjusted operating profit increased by 26% to
£39.4 million (2006: £31.3 million). The increase in operating margins by 2.5
percentage points, from 10.3% to 12.8%, is encouraging and evidence of the
Board's determination to restore margins to a level commensurate with the high
quality of the group's businesses.
Profit before tax increased by 34% to £36.8 million (2006: £27.5 million) and
earnings per share increased by 32% from 15.7p to 20.8p.
Cash conversion was strong with 93% of operating profit converted to operating
cash. Net proceeds from the disposal of the Ircon and Spectrum businesses were
£30.4 million. Whilst the buy-back of 3.5 million shares absorbed £32.5 million,
net debt at the end of the period was £62.1 million, compared with £71.7 million
at the end of December 2006. Interest costs were £3.1 million, giving an
annualised cover of 13.1 times.
The Board proposes to pay an interim dividend of 5.75p, an increase of 15%. The
dividend will be paid on 16 November 2007 to shareholders on the register at 26
October 2007.
Board changes
Andrew Given retired from the Board at the AGM in May, having completed his two
three-year terms, and I re-iterate my thanks to him expressed earlier in the
year. I should like to welcome John Hughes, who joined the Board as a
non-executive director in June.
Outlook
The order backlog, together with current order levels and increasing margins,
provides confidence that the group will show continued improvement consistent
with expectations for the year.
John Poulter
Chairman
*Unless otherwise stated, all sales and operating profit figures are on a
continuing businesses basis and exclude the businesses divested. Figures for
operating profit, profit before tax and earnings per share are adjusted measures
- for explanation of adjusted figures see Note 2.
Chief Executive's review
Introduction
Spectris made good progress in the first half of 2007, with sales, profits and
operating margins all improving compared with the corresponding period in the
prior year. At constant currencies, sales increased by 7.6%, including 1.2% from
bolt-on acquisitions, and operating profit increased by 43%. Sales at actual
exchange rates increased by 1.7% to £308.7 million. This reflects the strength
of sterling, which has increased by 10% against the US dollar and 14% against
the Japanese yen compared with the same period last year. Operating profit at
actual exchange rates increased by 26% to £39.4 million. Margins improved to
12.8% (2006: 10.3%), reflecting the benefits from the increase in volume and the
restructuring actions taken in 2006.
Geographically, sales in Europe increased by 9% at constant currencies. Organic
sales in North America grew by 6% at constant currencies. Asia grew by 4% at
constant currencies, with good growth in China and Japan offset by fewer large
projects in other parts of the region. Sales in the rest of the world increased
by 15%.
Cash generation continues to be a focus and remained strong in the first half
with 93% of operating profit converted to operating cash. The previously
announced disposal programme was concluded in the first half, with the sale of
the Ircon business to Fluke Electronics Corporation on 15 June. This followed
the sale of Spectrum Inspection Systems to Illinois Tool Works Inc on 28
February.
Sector performance
Sales, profits and operating margins showed good improvement in all three
sectors. A more detailed analysis of individual sector performance follows.
Process Technology
Sales increased by 2% to £163.4 million, and by 9% at constant currencies.
Operating profit increased by 16% to £19.2 million and operating margins
improved by 1.4 percentage points to 11.8%. Restructuring charges in the first
half of 2007 were £nil (2006: £0.6 million).
Demand from the pharmaceutical industry continued to be strong for Malvern,
PANalytical and Particle Measuring Systems in Europe and, increasingly, in Asia
as the globalisation of pharmaceutical markets continues. India and China are
growing in importance as key countries for multinational pharmaceutical
companies to carry out manufacturing and research activities. There is evidence
of some slowdown in demand in North America as the pharmaceutical industry
restructures in response to the increase in the use of generic prescription
drugs and the growth in emerging markets. In March Malvern signed an agreement
with Farfield Scientific Limited, giving the company exclusive distribution
rights in North, Central and South America for Farfield's unique range of
analytical instruments which are used to analyse the structure and behaviour of
proteins and nano-materials in the life sciences industry.
PANalytical continued to see good demand for its X-ray analysis systems from the
semiconductor industry to facilitate research and development of new materials
and processes. Fusion saw continued growth from the sale of its UV curing
systems into Asia for the production of flat panel displays. However, there is
some evidence of a slowdown in the semiconductor and some electronics sectors in
North America.
Demand from the automotive and aerospace industries was strong for Bruel & Kjaer
Sound & Vibration, as its noise testing systems were chosen by leading
manufacturers for new model development programmes. The recently released
automotive noise vibration harshness (NVH) vehicle simulator, which enables the
noise and vibration from vehicle components to be simulated at the design stage
before a physical prototype has been built, has already been ordered by a number
of major automotive customers. In March Bruel & Kjaer received the 'Company of
the year' award from Automotive Testing Technology Magazine based on, amongst
other factors, its work in the field of NVH simulation. In the aerospace market
Bruel & Kjaer had success with its jet engine noise monitoring applications.
These systems, based on the PULSE analyser platform, are used by major aero
engine manufacturers for noise certification in accordance with regulations on
engine noise emissions.
The mining and minerals sector continued to see growth, particularly in India,
where there are increasing opportunities in infrastructure projects.
PANalytical's Axios XRF systems saw strong demand in a wide range of processing
industries, particularly in China. In April PANalytical entered into a
partnership agreement with OBLF GmbH, which brings optical atomic emission
spectrometers to complement PANalytical's X-ray fluorescence (XRF) spectrometers
for the analysis of metals. Malvern's SyNIRgi near infrared chemical imaging
system, based on the platform which Malvern acquired from Spectral Dimensions
last year, won an Innovation Award for materials analysis and characterisation
at the Powtech/ Technopharm congress.
In-line Instrumentation
Sales in the In-line Instrumentation sector increased by 1% to £78.7 million,
and by 6% at constant currencies. Operating profit grew by 39% to £10.7 million,
with operating margins improving by 3.8 percentage points to 13.6%, reflecting
management actions and the benefits of the restructuring spend. Restructuring
charges in the first half of 2007 were £0.4 million (2006: £1.5 million).
In the pulp and paper industry a number of new paper mills have come on stream,
particularly in Asia and South America, as investment increases to meet rising
demand created by firmer pulp prices, which is starting to benefit BTG's
instrumentation business. At the same time, less efficient mills are being
decommissioned in other parts of the world. BTG's Duroblade business performed
well. The IPI business acquired in 2006 has shown good growth, benefiting from
Duroblade's worldwide sales network, and a number of new high performance blades
have been launched based on the latest materials technology.
Bruel & Kjaer Vibro's V6000 safety monitoring system has been well received by
the energy and petrochemical markets with a large number of systems already
installed and operating. Servomex won two major orders for analysers and
sampling systems for a new liquefied natural gas (LNG) terminal and refinery in
North America being built to meet the increasing demand for natural gas.
Strong demand in the rubber market in Asia, particularly China, helped drive
sales of NDC's scanning systems. Demand from the converting market in North
America continued to be good as investment in new production lines continued and
investment in flexible packaging and label production recovered. There was good
demand for the company's sensors from the food industry where they are used to
measure, amongst other things, moisture and oil content in snack foods.
Beta LaserMike saw good growth in sales to China, with particularly strong
demand for its LaserSpeed family of products. These are used in the production
of steel, wire, cable and other continuously manufactured products, where their
greater accuracy compared with conventional methods results in significant
material savings for customers.
Electronic Controls
Sales in the Electronic Controls sector increased by 2% to £66.6 million, and by
7% at constant currencies. Operating profit grew by 36% to £9.5 million and
operating margins increased by 3.6 percentage points to 14.3%.
Profitability improved at HBM as the continuing focus on higher value products,
together with overhead efficiency, showed benefits. The company launched an
optical strain gauge-based measurement system which is particularly suitable for
stress analysis of composite materials. This is increasingly used in the
aerospace industry and in other applications, for example wind turbine blades.
Microscan continued to extend its highly successful range of Quadrus bar code
scanning products into a broad spread of industries, with the recently launched
Quadrus MINI 3 providing the highest resolution currently available for data
tracking. With the ability to decode high density codes of less than 3
millimetres square, it is designed for use in industries such as printed circuit
board assembly and semiconductor manufacturing.
Red Lion Controls has been building additional distribution channels and is now
represented in multiple catalogues in Europe and North America, where sales of
its high volume products are showing strong growth. Red Lion's network
communication products saw good growth, particularly in Europe, and its human
machine interface (HMI) products performed well in North America. A new range of
displays was launched during the first half.
Financial review
During the first half of 2007, the group divested the Spectrum and Ircon
businesses on 28 February 2007 and 15 June 2007 respectively. In the first half
of 2006 the group divested the Arcom business on 31 March 2006. These three
businesses are not sufficiently material to be presented as discontinued
operations under IFRS, however Note 2 of these interim financial statements sets
out the impact that this has had on the results of the group.
Reported group sales in the first half decreased by 3% from £327.3 million to
£317.3 million driven by the divestments noted above; sales in continuing
businesses increased by 1.7%. Movements in foreign currency exchange rates had
an adverse effect on sales in continuing businesses of approximately 5.9% and
bolt-on acquisitions contributed approximately 1.2% of growth.
Reported unadjusted operating profit, after including acquisition-related
intangible asset amortisation charges of £1.0 million (2006: £0.7 million),
increased from £32.0 million to £38.9 million. Operating profit in continuing
businesses increased by 26% from £31.3 million to £39.4 million. Adverse
movements in foreign currency exchange rates had an effect on operating profit
of approximately £5.5 million and bolt-on acquisitions contributed approximately
£0.5 million to the result. Aside from the effect from sales growth, operating
profit benefited from the actions taken to improve margins and a reduction in
charges from restructuring activities from £2.1 million in the first half of
2006 million to £0.4 million in the first half of 2007.
Interest charges, including IAS 19 pension charges, reduced from £5.2 million to
£3.1 million, reflecting the reduction in net debt. Profit before tax increased
by 34% from £27.5 million to £36.8 million. After also including
acquisition-related intangible asset amortisation charges, £19.4 million profit
on disposal of the Spectrum and Ircon businesses (2006: £9.5 million profit on
disposal of the Arcom business), unrealised gains on the group's cross-currency
interest rate swaps of £1.2 million (2006: £0.6 million), the group's unadjusted
profit before tax increased by 53% from £36.9 million to £56.4 million.
Based on the forecast for the full year, the underlying tax rate for the half
year was 30% (2006: 29%), reflecting the move towards the weighted average
statutory tax rate as previously communicated.
Earnings per share increased by 32% from 15.7p to 20.8p as the combined effects
of higher operating profits and lower interest charges were offset slightly by
the higher tax rate. Basic earnings per share increased by 61% from 20.7p to
33.4p. In addition to the factors above, this increase primarily reflects the
profit realised on disposal of the Spectrum and Ircon businesses.
As announced earlier this year, the Spectrum Inspection Systems and Ircon
businesses were divested during the first half of the year. The Spectrum
business was sold to Illinois Tool Works Inc on 28 February 2007. After taking
account of transaction costs, net proceeds were £14.3 million. The Ircon
business was sold on 15 June 2007. After taking account of transaction costs
incurred to date, the net proceeds received in the first half of the year amount
to £16.1 million. It is expected that adjustments to the net proceeds in the
second half of the year to take account of final transaction costs and a working
capital adjustment mechanism will not exceed £0.5 million.
The share buy-back announced in February is continuing, with 3.5 million shares
purchased up to the end of June at a cost of £32.5 million.
Cash conversion was 93% (2006: 113%), in line with our stated target of 90-100%,
reflecting the differences in timing of charges and cash outflow from
restructuring activities. The cash generated by the group in the first half of
the year resulted in the reduction of net debt by £9.6 million to £62.1 million,
compared with £71.7 million at the start of the year. The share buy-back of 3.5
million shares cost £32.5 million, whilst net proceeds from the disposal of
businesses were £30.4 million.
John O'Higgins
Chief Executive
- ENDS -
Contact: John O'Higgins, Chief Executive, Spectris plc Tel: 01784 470470
Clive Watson, Group Finance Director, Spectris plc Tel: 01784 470470
Richard Mountain, Financial Dynamics Tel: 020 7269 7291
A table of results is attached.
The company will broadcast the meeting with analysts in a live webcast
commencing at 8.30 AM on the company's website at www.spectris.com.
Copies of this notice are available to the public from the registered office at
Station Road, Egham, Surrey TW20 9NP, and on the company's website at
www.spectris.com.
CONSOLIDATED INCOME STATEMENT
For the half year to 30 June 2007
2007 2006 2006
Half year Half year Full year
£m £m £m
Note
Continuing operations
2, 3 Revenue 317.3 327.3 684.5
Cost of sales (136.9) (138.7) (288.7)
Gross profit 180.4 188.6 395.8
Net operating expenses (141.5) (156.6) (313.1)
2, 3 Operating profit 38.9 32.0 82.7
4 Profit on disposal of businesses 19.4 9.5 9.5
5 Financial income 4.6 4.1 9.0
5 Finance costs (6.5) (8.7) (15.6)
Profit before tax 56.4 36.9 85.6
6 Taxation - UK (0.6) (0.6) (0.5)
6 Taxation - Overseas (14.3) (10.6) (23.7)
Profit after tax for the period from continuing
operations attributable to equity shareholders 41.5 25.7 61.4
7 Basic earnings per share 33.4p 20.7p 49.4p
7 Diluted earnings per share 33.2p 20.7p 49.2p
8 Dividends arising in respect of the period
(per share) 5.75p 5.0p 17.5p
Dividends paid during the period (per share) 12.5p 11.2p 16.2p
Spectris uses adjusted figures as key performance measures in addition to those
reported under IFRS. Adjusted figures are stated before amortisation of
acquisition-related intangible assets, goodwill charges, profits or losses on
termination or disposal of businesses or major fixed assets, unrealised changes
in the fair value of financial instruments, related tax effects and other tax
items which do not form part of the underlying tax rate.
Reconciliations showing how the adjusted performance measures are derived from
those reported under IFRS are set out in Note 2.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the half year to 30 June 2007
2007 2006 2006
Half year Half year Full year
£m £m £m
Net (loss)/gain on effective portion of changes in fair
value of forward exchange contracts (0.1) 1.6 1.7
Deferred tax on changes in fair value of forward exchange
contracts - (0.5) (0.5)
Net gain on changes in fair value of effective portion of
net investment hedge 1.0 3.3 7.6
Actuarial gain arising on pension schemes 4.8 0.4 1.8
Exchange differences on pension schemes - - 0.4
Adjustment to prior year deferred tax on pension schemes (1.8) - -
Current and deferred tax on actuarial gain and losses on
pension schemes (1.5) (0.1) (0.6)
Foreign exchange difference on translation of overseas
operations (2.7) (5.2) (19.9)
Current tax on foreign exchange differences (0.3) - (0.1)
Deferred tax on share options 0.2 - -
Net expense recognised in equity in respect
of year (0.4) (0.5) (9.6)
Profit for the period 41.5 25.7 61.4
Total recognised income and expense for the period
attributable to equity shareholders 41.1 25.2 51.8
CONSOLIDATED BALANCE SHEET
At 30 June 2007
2007 2006 2006
Half year Half year Full year
Note £m £m £m
Non-current assets
Goodwill 209.1 209.6 207.4
Other intangible assets 5.4 5.1 8.0
Property, plant & equipment 82.1 90.1 83.2
Deferred tax asset 30.2 39.4 37.6
326.8 344.2 336.2
Current assets
Inventories 87.6 88.3 81.6
Derivative financial instruments 1.2 1.3 1.3
Taxation recoverable 0.2 - 0.5
Trade and other receivables 128.3 137.2 145.4
Cash and cash equivalents 56.7 101.4 51.0
Assets held for sale - - 17.3
274.0 328.2 297.1
Total assets 600.8 672.4 633.3
Current liabilities
Short-term borrowings (2.0) (58.5) (4.3)
Derivative financial instruments - (18.1) -
Trade and other payables (111.8) (121.7) (124.2)
Current tax liabilities (35.2) (27.6) (32.9)
Provisions (21.4) (15.8) (21.8)
Liabilities held for sale - - (6.0)
(170.4) (241.7) (189.2)
Net current assets 103.6 86.5 107.9
Non-current liabilities
Medium and long-term borrowings (105.7) (114.7) (108.6)
Derivative financial instruments (13.0) (13.6) (12.8)
Other payables (8.4) (6.4) (8.8)
Retirement benefit obligations (12.9) (21.6) (18.8)
Provisions - (1.6) -
Deferred tax liabilities (1.0) (1.1) (1.0)
(141.0) (159.0) (150.0)
Total liabilities (311.4) (400.7) (339.2)
Net assets 289.4 271.7 294.1
Equity
9 Issued share capital 6.2 6.2 6.2
9 Share premium 231.4 230.4 231.1
9 Retained earnings 64.1 35.3 67.3
9 Translation reserve (16.8) (4.7) (15.1)
9 Hedging reserve 1.1 1.1 1.2
9 Merger reserve 3.1 3.1 3.1
9 Capital redemption reserve 0.3 0.3 0.3
Equity shareholders' funds 289.4 271.7 294.1
Total equity and liabilities 600.8 672.4 633.3
CONSOLIDATED CASH FLOW STATEMENT
For the half year to 30 June 2007
2007 2006 2006
Note Half year Half year Full year
£m £m £m
Cash flows from operating activities
Profit after tax 41.5 25.7 61.4
Adjustments for:
Tax 14.9 11.2 24.2
Profit on disposal of businesses (19.4) (9.5) (9.5)
Finance costs 6.5 8.7 15.6
Financial income (4.6) (4.1) (9.0)
Depreciation 6.3 6.8 13.2
Amortisation of intangible assets 1.0 0.7 1.9
Goodwill reduction - - 1.2
Loss on sale of property, plant & equipment 0.3 0.1 0.5
Equity settled share-based payment expense 0.4 0.3 0.6
Operating profit before changes in working capital and
provisions 46.9 39.9 100.1
Decrease/(increase) in trade and other receivables 15.3 10.4 (8.9)
Increase in inventories (7.1) (2.0) (1.0)
(Decrease)/increase in trade and other payables (10.8) (9.2) 4.4
(Decrease)/increase in provisions and employee
benefits (2.5) 2.6 7.4
Corporation tax paid (8.5) (12.3) (21.5)
2 Net cash from operating activities 33.3 29.4 80.5
Cash flows from investing activities
Purchase of property, plant & equipment (4.9) (4.9) (10.5)
Proceeds from sale of property, plant & equipment 0.1 0.1 -
Acquisition of businesses, net of cash acquired (0.5) (1.7) (13.6)
Proceeds from disposal of businesses, net of cash
disposed 30.4 13.5 13.3
Interest received 1.0 1.3 2.0
Net cash from investing activities 26.1 8.3 (8.8)
Cash flows from financing activities
Interest paid (4.1) (6.5) (13.2)
Dividends paid to equity holders of the parent (15.4) (13.9) (20.2)
Share options exercised by issue of share capital 0.1 1.0 1.5
Share options exercised from shares held by Employee
Benefit Trust 0.9 2.7 3.8
Share options exercised from treasury shares 2.0 - -
Purchase/sale of own shares by Employee Benefit Trust (1.5) 0.9 0.9
Purchase of own shares - treasury shares (32.5) - -
Cancellation of cross-currency swap - - (2.9)
Repayment of borrowings - - (65.9)
Decrease in finance lease liabilities (0.1) - (0.4)
Net cash from financing activities (50.6) (15.8) (96.4)
Net increase/(decrease) in cash and cash equivalents 8.8 21.9 (24.7)
Cash and cash equivalents at beginning of period 47.0 76.1 76.1
Effect of foreign exchange rate changes (0.6) (1.1) (4.4)
Cash and cash equivalents at end of period 55.2 96.9 47.0
2007 2006 2006
Note Half year Half year Full year
£m £m £m
Reconciliation of changes in cash and cash equivalents
to movements in net debt:
Net increase/(decrease) in cash and cash
equivalents 8.8 21.9 (24.7)
Repayment of borrowings - - 65.9
Net decrease in finance lease liabilities 0.1 - 0.4
Effect of foreign exchange rate changes 0.7 2.8 6.6
Movement in net debt 9.6 24.7 48.2
Net debt at start of period (71.7) (119.9) (119.9)
2 Net debt at end of period (62.1) (95.2) (71.7)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. PrincipAL accounting policies and basis of preparation
Spectris plc is a limited company incorporated and domiciled in the United
Kingdom under the Companies Act 1985, 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 2007 comprise the company and its subsidiaries,
together referred to as the group. These condensed consolidated interim
financial statements are presented in pounds sterling. The consolidated
financial statements of the group for the year ended 31 December 2006 are
available upon request from the company's registered office at Station Road,
Egham, Surrey TW20 9NP.
These condensed consolidated financial statements are drawn up in accordance
with International Accounting Standards (IAS) and International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards
Board, with the exception of IAS 34 Interim Financial Reporting which has not
been applied in these interim condensed consolidated financial statements. 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 2006.
The accounting policies applied by the group in these condensed consolidated
financial statements are the same as those applied by the group in its
consolidated financial statements for the year ended 31 December 2006.
The interim results are unaudited. The audit report on the 2006 Annual Report
was unqualified and has been filed with the Registrar of Companies. The 2006
Annual Report did not contain a statement under Section 237 (2) or (3) of the
Companies Act 1985.
The preparation of interim financial statements 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. Except as described below, 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 2006.
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 2006.
These condensed consolidated interim financial statements were approved by the
Board of Directors on 24 August 2007.
2. ADJUSTED PERFORMANCE MEASURES
Spectris uses adjusted figures as key performance measures in addition to those
reported under adopted IFRS. Adjusted figures are stated before amortisation of
acquisition-related intangible assets, goodwill charges, profits or losses on
termination or disposal of businesses or major fixed assets, unrealised changes
in the fair value of financial instruments, related tax effects and other tax
items which do not form part of the underlying tax rate (see Note 6).
The adjusted performance measures are derived from the reported figures under
adopted IFRS as follows:
2007 2006 2006
Note Half year Half year Full year
Adjusted sales £m £m £m
3 Sales as reported under adopted IFRS 317.3 327.3 684.5
Divested businesses (8.6) (23.7) (41.9)
Adjusted sales for continuing businesses 308.7 303.6 642.6
Note Process In-line Electronic 2007
Technology Instrumentation Controls Half year
Total
Adjusted sales by segment - June 2007 £m £m £m £m
3 Sales as reported under adopted IFRS 163.4 87.3 66.6 317.3
Divested businesses - (8.6) - (8.6)
Adjusted sales for continuing businesses 163.4 78.7 66.6 308.7
Note Process In-line Electronic 2006
Technology Instrumentation Controls Half year
Total
Adjusted sales by segment - June 2006 £m £m £m £m
3 Sales as reported under adopted IFRS 160.0 98.1 69.2 327.3
Divested businesses - (19.8) (3.9) (23.7)
Adjusted sales for continuing businesses 160.0 78.3 65.3 303.6
Note Process In-line Electronic 2006
Technology Instrumentation Controls Full year
Total
Adjusted sales by segment - December 2006 £m £m £m £m
3 Sales as reported under adopted IFRS 343.6 202.2 138.7 684.5
Divested businesses - (38.0) (3.9) (41.9)
Adjusted sales for continuing businesses 343.6 164.2 134.8 642.6
2007 2006 2006
Note Half year Half year Full year
Adjusted operating profit £m £m £m
3 Operating profit as reported under adopted IFRS 38.9 32.0 82.7
Amortisation of acquisition-related intangible assets 1.0 0.7 1.8
Goodwill reduction - - 1.2
Adjusted operating profit 39.9 32.7 85.7
Divested businesses (0.5) (1.4) (2.5)
Adjusted operating profit for continuing businesses 39.4 31.3 83.2
Restructuring charges for continuing businesses 0.4 2.1 7.7
Adjusted operating profit for continuing businesses
before restructuring charges 39.8 33.4 90.9
Note Process In-line Electronic 2007
Technology Instrumentation Controls Half year
Total
Adjusted operating profit by segment - June 2007 £m £m £m £m
3 Segment result under adopted IFRS 18.4 11.0 9.5 38.9
Amortisation of acquisition-related intangible
assets 0.8 0.2 - 1.0
Goodwill impairment charge - - - -
Adjusted operating profit 19.2 11.2 9.5 39.9
Divested businesses - (0.5) - (0.5)
Corporate cost reallocation* - - - -
Adjusted operating profit for continuing
businesses 19.2 10.7 9.5 39.4
Restructuring charges for continuing businesses - 0.4 - 0.4
Adjusted operating profit for continuing
businesses before restructuring charges 19.2 11.1 9.5 39.8
Note Process In-line Electronic 2006
Technology Instrumentation Controls Half year
Total
Adjusted operating profit by segment - June 2006 £m £m £m £m
3 Segment result under adopted IFRS 16.1 8.6 7.3 32.0
Amortisation of acquisition-related intangible
assets 0.7 - - 0.7
Goodwill impairment charge - - - -
Adjusted operating profit 16.8 8.6 7.3 32.7
Divested businesses - (1.1) (0.3) (1.4)
Corporate cost reallocation* (0.2) 0.2 - -
Adjusted operating profit for continuing
businesses 16.6 7.7 7.0 31.3
Restructuring charges for continuing businesses 0.6 1.5 - 2.1
Adjusted operating profit for continuing
businesses before restructuring charges 17.2 9.2 7.0 33.4
Note Process In-line Electronic 2006
Technology Instrumentation Controls Full year
Total
Adjusted operating profit by segment - £m £m £m £m
December 2006
3 Segment result under adopted IFRS 42.6 22.9 17.2 82.7
Amortisation of acquisition-related intangible
assets 1.7 0.1 - 1.8
Goodwill impairment charge 1.2 - - 1.2
Adjusted operating profit 45.5 23.0 17.2 85.7
Divested businesses - (2.3) (0.2) (2.5)
Corporate cost reallocation* (0.3) 0.4 (0.1) -
Adjusted operating profit for continuing
businesses 45.2 21.1 16.9 83.2
Restructuring charges for continuing businesses 1.9 5.1 0.7 7.7
Adjusted operating profit for continuing
businesses before restructuring charges 47.1 26.2 17.6 90.9
* The adjustment for corporate cost reallocation is a consequence of the
adjustment for divested businesses and reallocates all corporate costs to the
continuing businesses.
2007 2006 2006
Note Half year Half year Full year
Adjusted profit before tax £m £m £m
Profit before tax as reported under adopted IFRS 56.4 36.9 85.6
Amortisation of acquisition-related intangible assets 1.0 0.7 1.8
Goodwill reduction - - 1.2
4 Profit on disposal of businesses (19.4) (9.5) (9.5)
5 Unrealised change in fair value of cross-currency
interest rate swaps (1.2) (0.6) (2.8)
Adjusted profit before tax 36.8 27.5 76.3
2007 2006 2006
Half year Half year Full year
Operating cash flow £m £m £m
Net cash from operating activities under adopted
IFRS 33.3 29.4 80.5
Corporation tax paid 8.5 12.3 21.5
Purchase of property, plant & equipment (4.9) (4.9) (10.5)
Proceeds from sale of property, plant & equipment 0.1 0.1 -
Operating cash flow for management purposes 37.0 36.9 91.5
Divested businesses (0.8) (1.9) (3.1)
Operating cash flow for management purposes
for continuing businesses 36.2 35.0 88.4
2007 2006 2006
Note Half year Half year Full year
Adjusted earnings per share £m £m £m
Profit after tax as reported under adopted IFRS 41.5 25.7 61.4
Adjusted for:
Amortisation of acquisition-related intangible assets 1.0 0.7 1.8
Goodwill reduction - - 1.2
4 Profit on disposal of businesses (19.4) (9.5) (9.5)
5 Unrealised change in fair value of (1.2) (0.6) (2.8)
cross-currency interest rate swaps
6 Tax effect of the above 3.9 3.2 3.4
6 Other tax items not forming part of the underlying tax - - (1.2)
rate
Adjusted earnings 25.8 19.5 54.3
Weighted average number of shares outstanding (millions) 124.3 124.0 124.3
Adjusted earnings per share (pence) 20.8p 15.7p 43.7p
2007 2006 2006
Half year Half year Full year
Adjusted diluted earnings per share
Adjusted earnings (as above) (£m) 25.8 19.5 54.3
Diluted weighted average number of shares
outstanding (millions) 124.9 124.4 124.7
Adjusted diluted earnings per share (pence) 20.7p 15.7p 43.5p
2007 2006 2006
Half year Half year Full year
Analysis of net debt for management purposes £m £m £m
Bank overdrafts 1.5 4.5 4.0
Bank loans - secured 2.5 2.4 2.7
Unsecured loan notes 103.7 166.1 106.1
Cross-currency interest rate swaps - currency portion 11.1 23.4 9.8
Finance lease liabilities - 0.2 0.1
Total borrowings 118.8 196.6 122.7
Cash balances (56.7) (101.4) (51.0)
Net debt 62.1 95.2 71.7
2007 2006 2006
Half year Half year Full year
Analysis of revenue by geographical destination for £m £m £m
continuing businesses
UK 13.8 13.3 28.6
Continental Europe 121.3 113.6 244.5
North America 73.9 75.3 157.0
Japan 25.1 26.4 55.5
China 25.0 24.5 49.0
Rest of Asia Pacific 32.4 34.6 74.7
Rest of the world 17.2 15.9 33.3
Total continuing businesses 308.7 303.6 642.6
Divested businesses 8.6 23.7 41.9
Group total 317.3 327.3 684.5
3. SEGMENTAL ANALYSIS
The group's primary reporting format is business segments and its secondary
format is geographical segments.
a) Analysis by business segment
External customer revenue Segment result
2007 2006 2006 2007 2006 2006
Half year Half year Full year Half year Half year Full year
£m £m £m £m £m £m
Process Technology 163.4 160.0 343.6 18.4 16.1 42.6
In-line Instrumentation 87.3 98.1 202.2 11.0 8.6 22.9
Electronic Controls 66.6 69.2 138.7 9.5 7.3 17.2
Total 317.3 327.3 684.5 38.9 32.0 82.7
Profit on disposal of businesses 19.4 9.5 9.5
Financial income 4.6 4.1 9.0
Finance costs (6.5) (8.7) (15.6)
Profit before tax 56.4 36.9 85.6
Tax (14.9) (11.2) (24.2)
Profit after tax 41.5 25.7 61.4
The operating businesses are grouped as follows:
Process Technology: Bruel & Kjaer Sound & Vibration, Fusion UV Systems, Malvern
Instruments, PANalytical, Particle Measuring Systems.
In-line Instrumentation: Beta LaserMike, Bruel & Kjaer Vibro, BTG, Ircon*, NDC
Infrared Engineering, Servomex, Spectrum Inspection Systems*.
Electronic Controls: Arcom Control Systems*, HBM, Microscan, Red Lion Controls.
*As described in Note 4, the Ircon and Spectrum businesses were divested in the
first half of 2007. The Arcom business was divested in the first half of 2006.
b) Analysis of revenue by geographical segment
The group's business operations are each located in several geographical
locations and sell on to external customers in all parts of the world.
The following is an analysis of revenue by geographical destination:
2007 2006 2006
Half year Half year Full year
£m £m £m
UK 15.0 17.7 36.3
Continental Europe 123.3 118.6 253.5
North America 78.1 86.6 176.4
Japan 25.2 26.5 55.8
China 25.2 24.9 50.1
Rest of Asia Pacific 32.9 36.1 76.9
Rest of the world 17.6 16.9 35.5
Total 317.3 327.3 684.5
4. DISPOSAL OF BUSINESSES
During the period, the group divested the Ircon and Spectrum businesses, which
were previously included in the In-line Instrumentation segment. The Spectrum
business was divested on 28 February 2007 and the Ircon business was divested on
15 June 2007. These businesses were classified as held for sale at the most
recent year end. The total consideration was £30.4m net of transaction expenses.
The disposals gave rise to a profit of £19.4m.
The effect of the disposals on individual assets and liabilities of the group is
as follows:
£m
Goodwill 2.9
Property, plant & equipment 2.4
Inventories 3.7
Trade and other receivables 5.6
Cash and cash equivalents 0.1
Taxation 1.1
Trade and other payables (5.2)
Provisions (0.7)
Net assets disposed 9.9
Consideration received, satisfied in cash 33.4
Overdraft disposed of 0.1
Transaction expenses (3.1)
Net cash inflow 30.4
Cash received, net of transaction expenses and cash 30.4
disposed of
Net assets disposed of (9.9)
Accruals and provisions (1.1)
Profit on disposal of businesses 19.4
5. FINANCE COSTS AND FINANCIAL INCOME
2007 2006 2006
Half year Half year Full year
Financial income £m £m £m
Bank interest receivable 1.0 1.4 2.0
Unrealised gain in fair value of cross-currency 1.2 0.6 2.8
interest rate swaps
Expected return on pension scheme assets 2.4 2.1 4.2
4.6 4.1 9.0
2007 2006 2006
Half year Half year Full year
Finance costs £m £m £m
Interest payable on bank loans and overdrafts 0.1 0.1 0.5
Interest payable on other loans 4.0 6.4 10.6
Total interest payable 4.1 6.5 11.1
Interest cost on pension scheme liabilities 2.4 2.2 4.5
6.5 8.7 15.6
6. TAX ON PROFIT ON ORDINARY ACTIVITIES
The taxation charge for the six months to 30 June 2007 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 30% (30 June
2006: 29%; year ended 31 December 2006: 29%). A reconciliation of the tax charge
on adjusted profit to the actual tax charge is presented below:
2007 2006 2006
Half year Half year Full year
The tax charge is analysed as follows: £m £m £m
Tax charge on adjusted profit before tax at effective
rate 11.0 8.0 22.0
Tax credit on amortisation of intangible assets (0.3) (0.2) (0.6)
Tax charge on unrealised loss on change in fair value of
financial instruments 0.4 0.2 0.8
Material transfers from unrecognised tax assets - - (1.2)
Tax charge on profit on disposal of businesses 3.8 3.2 3.2
Total 14.9 11.2 24.2
7. EARNINGS PER SHARE
Earnings per share is calculated as follows:
2007 2006 2006
Half year Half year Full year
Basic earnings per share
Profit after tax (£m) 41.5 25.7 61.4
Weighted average number of shares outstanding
(millions) 124.3 124.0 124.3
Basic earnings per share (pence) 33.4 20.7 49.4
Basic earnings per share amounts are calculated by dividing net profit for the
year attributable to ordinary equity shareholders of the parent by the weighted
average number of ordinary shares outstanding during the year.
The calculation of diluted earnings per share of 33.2p (30 June 2006: 20.7p; 31
December 2006: 49.2p) is based on the group profit of £41.5m (30 June 2006:
£25.7m; 31 December 2006: £61.4m) and on the diluted weighted average number of
5p ordinary shares in issue during the year of 124.9 million (30 June 2006:
124.4 million, 31 December 2006: 124.7 million).
8. DIVIDENDS
The interim dividend of 5.75p per share (2006 interim dividend: 5.0p) will be
payable on 16 November 2007 to ordinary shareholders on the register at the
close of business on 26 October 2007.
9. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the half year to 30 June 2007
Share Share Retained Translation Hedging Merger Capital Total
capital premium earnings reserve reserve reserve redemption equity
reserve
£m £m £m £m £m £m £m £m
At 1 January 2007 6.2 231.1 67.3 (15.1) 1.2 3.1 0.3 294.1
Gains and losses - period ended 30
June 2007
Total recognised income/(expense) - - 42.9 (1.7) (0.1) - - 41.1
Distributions to and transactions
with shareholders:
Dividends paid - - (15.4) - - - - (15.4)
Own shares (treasury) purchased - - (32.5) - - - - (32.5)
Own shares (EBT) purchased - - (1.5) - - - - (1.5)
Share-based payments - - 0.4 - - - - 0.4
Share options exercised from own
shares (treasury) purchased - - 2.0 - - - - 2.0
Share options exercised by issue of
share capital - 0.3 - - - - - 0.3
Share options exercised from shares
held by Employee Benefit Trust - - 0.9 - - - - 0.9
At 30 June 2007 6.2 231.4 64.1 (16.8) 1.1 3.1 0.3 289.4
10. TREASURY SHARES
During the year the group repurchased 3.5 million shares (2006: nil) for a
consideration of £32.5m (2006: £nil). 0.4 million of these shares were issued to
satisfy options exercised by employees which were granted under the group's
share scheme. No shares were cancelled during the year (2006: nil).
11. INTERIM REPORT
Copies of the interim report, which will be posted to shareholders at the end of
August, may be obtained from the registered office at Station Road, Egham,
Surrey TW20 9NP. The report will also be available on the company's website at
www.spectris.com.
This information is provided by RNS
The company news service from the London Stock Exchange
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