TIDMSXS
RNS Number : 3489U
Spectris PLC
01 August 2022
2022 half year results
1 August 2022 - Spectris plc (SXS: LSE), the expert in providing
insight through precision measurement, announces half year results
for the six months ended 30 June 2022 .
A more focused, more profitable, more resilient business,
delivering strong growth
-- Continuing strong demand and growth, delivering good
financial performance
-- 20% like-for-like ('LFL')(1) order growth; record order book
provides strong visibility into H2
-- 11% LFL sales growth driven by market share gains; statutory
reported sales up 6%
-- Adjusted operating margin maintained at 12.7%; statutory
operating margin 9.5%
-- Increased investment in R&D, up from 7.6% to 8.3% of
sales
-- Confidence in high single digit organic sales growth and
margin expansion for the full year
-- Further simplification of the Group
-- Sale of Omega completed, GBP410 million headline proceeds in
July, delivering significant shareholder value and further
improving the quality of the Group
-- Strong balance sheet and capital allocation policy in
action
-- Increasing investment for growth; 17% increase in R&D
spending; higher capex for facility expansion at PMS; higher
working capital to support order book execution
-- GBP150 million of share buyback programme completed;
remaining GBP150 million re-starting
-- Dividend per share increase of 5%
-- Acquisitions announced across all divisions, with capacity for further value-enhancing M&A
-- Sustainability at the core of our strategy
-- Joined the UN Global Compact in support of our commitment
-- Well positioned in attractive end markets, with strong
fundamentals, supported by key sustainability themes
Like-for-like
Continuing operations H1 2022 H1 2021 Change change 1
------------------------------- ------- ------- ------- -------------
Adjusted (1,) 2
Sales (GBPm) 570.2 537.5 6.1% 11%
Operating profit (GBPm) 72.3 68.1 6.2% 6%
Operating margin (%) 12.7% 12.7% - (60bps)
Profit before tax (GBPm) 70.3 65.1 8.0%
Earnings per share (pence) 49.8p 44.0p 13.2%
Adjusted cash flow conversion
(%) 39% 117% (78pp)
Return on gross capital
employed (%) 13.8% 12.4% 140bps
Statutory
Sales (GBPm) 570.2 537.5 6.1%
Operating profit (GBPm) 54.3 55.4 (2.0%)
Operating margin (%) 9.5% 10.3% (80bps)
Profit before tax (GBPm) 41.8 181.9 (77.0%)
Cash generated from operations 43.4 96.7 (55.1%)
Basic earnings per share
from continuing operations
(pence) 26.5p 152.4p (82.6%)
Dividend per share (pence) 24.1p 23.0p [5%]
-------------------------------- ------- ------- ------- -------------
1. Alternative performance measures ('APMs') are used
consistently throughout this press release and are referred to as
'adjusted' or 'like-for-like' ('LFL'). These are defined in full
and reconciled to the reported statutory measures in the
appendix.
2. The Omega business has been classified as a discontinued
operation and the assets and liabilities have been classified as
held for sale. Accordingly, the financial statements for the
current and comparative periods have been amended and show
continuing operations.
Commenting on the results, Andrew Heath, Chief Executive, said:
" Over the past three years, we have transformed the Group into a
more focused, more profitable and more resilient business, with the
ability to compound growth at a higher rate through the cycle.
Today, Spectris is in a position of strength with a robust balance
sheet, well positioned in attractive end markets, with strong
fundamentals, supported by key sustainability themes to deliver
structural growth. We have fantastic, engaged people all
contributing to a purpose-led, high-performance growth culture.
I am pleased with our progress in the first half of 2022. We are
continuing to see healthy demand for our products and services,
with strong LFL growth in both orders and sales. While vigilant to
the macro environment and alert to signs of changes in demand, we
have confidence in our business and have increased our investment
for growth in R&D, to enhance our customer offerings. With our
current order visibility, we expect to deliver high single digit
organic sales growth and margin expansion for the full year,
supported by the Spectris Business System and pricing already in
the order book. The successful sale of Omega delivered significant
shareholder value; demonstrating our continued portfolio
discipline, as we further improve the quality of the Group.
The next stage of our strategy will advance our ambition to be a
leading sustainable business, delivering on our purpose to help
make the world cleaner, healthier and more productive. We will
build on the platform we have created to deliver strong,
sustainable organic growth through the cycle, alongside continued
margin expansion. We look forward to sharing more details at our
upcoming Capital Markets Day in October."
Contacts:
Spectris plc
Siobhán Andrews
Head of Corporate Affairs
+44 20 4551 4549/+44 7920 230093
Tulchan Communications
Martin Robinson
Giles Kernick
+44 20 7353 4200
Conference call
A webcast of the presentation will be made available on-demand
from 07.00 and a Q&A conference call for analysts and investors
will be hosted by Andrew Heath, Chief Executive, and Derek
Harding,
Chief Financial Officer, at 10.00 today to discuss this
statement. To access the call, please dial
+44 (0) 20 3936 2999/0800 640 6441 - Pin code: 441101. Or for
replay, please dial +44 (0) 20 3936 3001 -
Pin code: 318025. Copies of this press release are available to
the public from the registered office at Melbourne House, 44-46
Aldwych, London, WC2B 4LL and on the Company's website at
www.spectris.com.
About Spectris
Spectris' global group of businesses are focused on delivering
value beyond measure for all our stakeholders. We target global,
attractive and sustainable markets, where growth and high returns
are supported by long-term drivers. Precision is at the heart of
what we do. We provide customers with expert insight through our
advanced instruments and test equipment, augmented by the power of
our software and services. This equips customers with the ability
to reduce time to market, improve processes, quality and yield. In
this way, Spectris know-how creates value for our wider society, as
our customers design, develop, test and manufacture their products
to make the world a cleaner, healthier and more productive place.
Headquartered in London, United Kingdom, the Company employs
approximately 7,350 people located in more than 30 countries. For
more information, visit www.spectris.com .
Chief Executive's review
A more focused, more profitable, more resilient business
We have made good progress in the first half of 2022. Having
entered the year in a strong position, with a record order book,
healthy demand has remained for our products and services; enabling
us to build on the positive momentum from 2021. We delivered double
digit sales growth in the first half and continued to extend our
order book, reflecting the underlying strength of demand from our
customers.
With our current visibility, w e expect to deliver high single
digit organic sales growth with margin expansion for the full year,
supported by the Spectris Business System and pricing already in
the order book.
Our higher quality, more focused portfolio, provides us with
confidence that we will continue to enhance margins, even in the
current inflationary environment. The gross margin is temporarily
impacted by the delay in recognising increased prices and supply
chain disruption costs in executing the order book to support our
customers. While we remain vigilant to the macro environment and
alert to any potential signs of changes in demand, we have
confidence in the outlook for our business and have increased our
investment for growth through the first six months of the year. I
am grateful to all of our employees for their continued efforts in
driving this strong performance.
Our Strategy for Profitable Growth has positioned us well. Since
2019, we have significantly strengthened our businesses, as well as
transforming the Group through disciplined portfolio management.
Following the successful divestment of Omega, with a highly
attractive valuation, Spectris today is an even more focused and
less cyclical business, with an improved financial profile,
concentrating on attractive growth markets, with the ability to
compound growth at a higher rate through the cycle. We are excited
about the opportunities across our businesses and are confident of
continuing to improve the quality and profitability of the Group
further.
Spectris is also now a much more resilient business. We operate
across a number of targeted end market segments and our businesses
work closely with customers, providing differentiated technologies
that provide premium, high-value services to our customers around
the world, equipping them to improve the drugs that heal us, the
food we eat, the materials we build with, the cars we drive, the
semiconductors that power our devices, or the air we breathe.
The strategy work we have executed over the past three years,
has been assisted by the roll out of the Spectris Business System
('SBS'), tightening our processes and improving the efficiency and
effectiveness of our operations. Additionally, it has been
bolstered by the Group-wide drive to bring the best out of the
Spectris culture, uniting our people behind a common purpose,
creating support networks, and embedding a high performance, 'aim
high' ethos that continues to push us forward.
We are now looking ahead to the next stage of our strategy,
which will build on the platform we have created to deliver strong,
sustainable organic growth, through the cycle, alongside continued
margin expansion. We see significant opportunities as we continue
to align the Group's activities with key sustainability themes, in
markets with long-term, strong structural growth drivers. We enter
this next phase from a position of strength, and our strong balance
sheet allows us to invest more in R&D, developing the next wave
of technologies and products that will drive our organic growth, in
addition to making targeted acquisitions that fit our strategy.
We look forward to sharing more on the next chapter and exciting
future for Spectris at our Capital Markets Day in October.
Good financial performance with strong revenue and order book
growth
Sales by geography and business - LFL growth vs H1 2021
Q1 Q2 H1 Q1 Q2 H1
------------------ --- --- --- -------------------- --- --- ---
North America 10% 21% 15% Malvern Panalytical 14% 15% 14%
Europe 12% 2% 7% HBK 8% 6% 7%
Asia 15% 9% 12% Industrial Solutions 15% 8% 11%
Rest of the World 6% 5% 6%
Total sales 12% 9% 11% 12% 9% 11%
------------------ --- --- --- -------------------- --- --- ---
Total orders 31% 11% 20% 31% 11% 20%
------------------ --- --- --- -------------------- --- --- ---
Customer demand continues to remain buoyant, delivering very
strong growth in the order book, with like-for-like ('LFL') order
intake up 20% in the first half.
As expected, this resulted in strong LFL sales growth of 11%
over the first six months of 2022, reflecting the introduction of
new and enhanced products over the past few years, which have
helped deliver market share gains. All our businesses are growing
ahead of their respective markets. All businesses delivered strong
order growth, and Asia saw good growth, even despite the COVID
lockdowns in China in the second quarter.
Our record order book and current visibility provide us with
confidence in our second half sales performance. We continue to
expect high single digit LFL sales growth for the full year,
consistent with previous guidance.
Adjusted operating profit of GBP72.3 million (H1 2021: GBP68.1
million) increased 6% on a LFL basis, at an adjusted operating
margin of 12.7% (H1 2021: 12.7%). This reflected higher sales,
partly offset by a lower gross margin and higher planned LFL
R&D spend, being 18% higher year-on-year, as we increase
investment for growth.
Our higher quality, more focused portfolio and pricing power
provides us with confidence that we will continue to enhance
margins, even in the current inflationary environment. The gross
margin is temporarily impacted by the timing lag in recognising
increased prices and supply-chain disruption costs in executing the
order book to support our customers.
Our premium products provide us with good pricing power to
continue to offset the higher inflation than expected at the time
of setting this year's budget. As such, we expect gross margins to
recover progressively in the second half, as price increases
implemented earlier in the year start to be reflected in sales.
Additionally, we are working hard to offset inflationary pressures
through the application of the SBS to drive cost efficiencies.
Consequently, we expect to see margin expansion in the second
half.
Our near-term target remains to return the Group to its previous
adjusted operating margin highs of 18%, and longer term to drive
further margin expansion beyond this level.
Positioned in diverse, attractive markets with structural and
sustainable growth drivers
Our focus on premium, precision measurement with sustainable
competitive advantage, equips our customers to make the world,
cleaner, healthier and more productive. We are more aligned than
ever to markets with attractive growth trajectories, positioned in
technology-driven end markets with strong fundamentals,
increasingly supported by sustainability thematics.
Within our established, target markets, these strong
sustainability trends are providing further, new growth
opportunities, which are expected to grow faster than average
industry growth rates. Many of these trends are already
underpinning the strong demand that we are currently seeing from
our customers. We have advantaged positions in these attractive
segments today:
-- Advancements in health - Group sales into pharma and life
sciences accounted for 25% of sales in the first half. Malvern
Panalytical has an established position in drug discovery,
development and manufacturing and PMS is a leader in the
contamination monitoring for aseptic manufacturing. In the first
half, both businesses saw continued strong demand, helped by the
success of our new products and services launched over the past few
years. For example, Malvern Panalytical's Zetasizer and OmniTrust
software for regulated environments delivered incremental sales of
GBP15 million;
-- Transformation of mobility - HBK's electrical powertrain
testing suite of offerings has grown from an annual contribution of
GBP6 million to GBP14 million over the past three years, in
electric and hybrid transportation, for both the automotive and
aerospace sectors ;
-- Energy transition - Malvern Panalytical delivered
above-market growth in energy technology-focused end markets and
academia, based on its strong domain knowledge and customer
relationships. Its products support the development of new/advanced
materials and technologies and in the first half, products into
battery and new energy technologies delivered GBP11 million in new
revenue and orders of GBP17 million. HBK has the unique ability to
integrate the physical and simulated testing space, supporting
customers with their product development, including helping to
solve complex testing requirements involved with the introduction
of new electrification technologies. HBK's battery solutions, for
mechanical vibration and electrical testing , accelerate
development of batteries for hybrid and pure EVs. In 2022, HBK is
expecting to realise GBP40 million in revenues in support of
customers' investments in battery development.
-- Environmental protection - Servomex's gas analysis solutions
saw growth into energy and utilities sectors for emissions
monitoring and control in the first half, due to alignment with
decarbonisation and net zero trends across the industry
-- More productive - HBK's virtual test activity has grown
materially over the past three years, delivering c.GBP60 million in
incremental annual revenue over that time, through the investment
in software and simulation offerings enabling customers to
significantly accelerate R&D, reducing time to market, cost and
risk, and carbon footprint in the development of new vehicles. PMS'
contamination monitoring and Servomex's high purity gas analysers
help deliver the highest yield rates in semiconductor fabrication.
Both businesses have has seen rapidly growing demand for their
latest products, with 39% and 21% LFL order growth in the first
half.
We see exciting opportunities to accelerate our growth along
these avenues over the coming years, both through organic
development, supported by our strategic growth initiatives and the
introduction of new products and services, and in targeted M&A
activity, closely aligned to our purpose.
Increasing investment to accelerate growth
We continue to invest more in R&D to better position us to
take advantage of these key trends and opportunities and to
accelerate growth. Since the launch of the Strategy for Profitable
Growth, there has been an increased focus across the Group on
innovation for growth - refreshing our product portfolios and
focusing our R&D investments on the most attractive
opportunities, aligned with our strategic initiatives, as evidenced
above.
We are confidently investing to drive growth and returns.
This year, we planned an incremental GBP10 million increase in
R&D spend. In the first half of the year, our R&D spend
rose GBP6.8 million year-on-year, up 17%, or 18% on a LFL basis, of
which GBP3 million is due to the acquisition of Creoptix and CCRT.
The increase in organic R&D investment includes product
extensions such as:
-- e xpanding our range of X-ray spectrometers and our particle
analysers, including a robot driven sample automation for the
Mastersizer, as well as next generation calorimeters and analytics
software at Malvern Panalytical;
-- the development of our new data acquisition hardware and
software platform, Advantage & Fusion, electric powertrain
testing, smart sensoring and virtual test offerings at HBK;
-- the release of seven new products at PMS, including several that use novel IP;
-- the completion of the product refresh at Red Lion and the
launch of its new industrial ethernet switch line, with additional
investment focused on advancing the security of the FlexEdge
product line; and
-- investment in a product refresh at Servomex for ultra-trace
moisture and oxygen analysers and the photometric process analyser
for industrial processes.
We have also increased our capital expenditure, with GBP31.6
million spent in the first half
(H1 2021: GBP18.3 million), and a key project being a new
facility for PMS, more than doubling its capacity, supporting
long-term growth.
To deliver near-term growth, we have been investing in our
working capital, protecting customer deliveries and to ensure
successful execution of the record order book.
Growth is also being supported through our sales strategy, by
adopting a more strategic approach to account management, helping
to deliver more repeat and recurring revenue, and a greater focus
on driving service revenues. The deployment of the new CRM and
sales system in HBK is further assisting this approach, while also
enabling a lower cost to serve.
Spectris Business System and ERP investment, supporting margin
expansion
We continue to improve our cost structure and invest in new
operational technologies to improve efficiency and reduce expense,
making our business even stronger, particularly in a higher
inflationary environment.
SBS is key to our strategy in delivering continuous, incremental
improvements in our performance, year over year, by engaging the
talents of our teams across the Group. I am pleased with the
progress we are making.
Examples in the first half include, amongst others, improvements
in revenue, manufacturing processes, working capital management and
environmental sustainability with positive impacts across all of
our businesses. These examples include:
-- At Malvern Panalytical, improvements in order planning and
balancing of the production of the Mastersizer assembly process to
better increase throughput and almost halve overall order lead
times;
-- Using Value Analysis and Value Engineering methodology, HBK
delivered a 40%+ reduction in per unit cost for a torque sensor
product line, and a significant reduction in use of disposed
plastics;
-- At HBK, an analysis of work-in-progress for its yarn tension
sensor products resulted in a rearranged production line layout to
make the material flow more smoothly, leading to a 28% improvement
in product delivery time, a 23% decrease in labour time and a
reduction in inventory;
-- At PMS, an analysis of our service provision and subsequent
retrofit of our service room and retraining of our engineering
capacity enabled us to provide a faster service response time to
customers, improving turn-around time by 46% and a quadrupling in
our service capacity, generating GBP1.6 million of extra
revenue;
-- Packaging analysis and redesign at PMS and Red Lion is
supporting our environmental sustainability goals while reducing
cost and use of packaging material.
Additionally, we are investing in new ERP implementations at
Malvern Panalytical and HBK over the next three years. This will
standardise, simplify and automate processes to enhance operations,
enabling our businesses to become more lean and agile, and also
scalable and flexible for growth. It will drive long-term
structural improvements to our operating model supporting our
growth and margin expansion ambitions, whilst also driving
efficiency and working capital improvements.
Deploying our strong cashflow and balance sheet for
value-enhancing M&A
Our strategy remains to deploy our capital to compound growth
and returns, investing in R&D for organic growth and value
enhancing M&A. Following completion of GBP150 million of the
share buyback programme, our balance sheet position at 30 June was
a net debt of GBP98.3 million. We expect to complete the remainder
of the GBP300 million buyback programme in the second half.
In April, we announced the divestment of Omega Engineering to
Arcline Investment Management for $525 million (GBP410 million).
The proceeds were received in early July, restoring the Group to a
strong net cash position.
In the first half of 2022, we made a number of bolt-on
acquisitions that will support our customers and accelerate our
strategic growth initiatives.
At Malvern Panalytical, the acquisition of Creoptix, in January,
strengthens our affinity offering for early-stage drug development
and discovery, a key target area in our pharma workflow strategy.
Its core instrument, the WAVE system, provides customers with
advanced molecular interaction analysis for lead generation in the
early stages of a drug's development cycle.
At HBK, the acquisition of Dytran Instruments, Inc, expected to
close in the second half, strengthens its piezo-electric sensor
offering, adds new MEMS capability and expands sales into North
America. Its products are used in a broad range of applications in
the space, aerospace, industrial and automotive industries in both
product development testing and embedded monitoring solutions.
HBK have also signed a joint venture agreement with DEWESoft, a
leading manufacturer of data acquisition ('DAQ') hardware, to help
accelerate the development of its new Fusion DAQ platform, and to
create a new industry, open standard for DAQ products.
In April, Red Lion acquired MB connect line GmbH, whose high
security hardware and software solutions enhance Red Lion's
industrial automation and networking technology portfolio. The
combination brings a full complement of products in industrial
cyber-security and offers customers a secure portal for remote
monitoring and configuration.
On 28 February, the Group announced that it was in discussions
with Oxford Instruments regarding a potential acquisition of the
business, to create a leading global player in precision
measurement. Due to significant uncertainty in the wake of Russia's
invasion of Ukraine, the Group announced the termination of talks
on 7 March.
We continually seek out opportunities to complement our
capabilities through M&A, from smaller bolt-on acquisitions to
larger-scale opportunities. Following the activity in the first
half, we continue to refresh our pipeline of opportunities. We will
maintain a disciplined approach to capital allocation and
generating enhanced returns.
The Board is proposing to pay an interim dividend of 24.1 pence
per share, (H1 2021: 23.0 pence per share), 5% growth year-on-year.
This is in line with our underlying policy of making progressive
dividend payments based upon affordability and sustainability
through-the-cycle.
Sustainability at our core
Sustainability is at the heart of our purpose, delivering value
beyond measure for all our stakeholders. We have a clear ambition
to create a positive and lasting impact, with the intention of
setting the benchmark among our peers for both the sustainability
of our operations and for our opportunity to harness the power of
precision measurement to make the world cleaner, healthier and more
productive.
In support of our commitment to a sustainable future, we were
proud to join the UN Global Compact in February. We are making good
progress on our environmental initiatives towards meeting our net
zero targets and on our social agenda.
We recognise that the sustainable success of our Group relies on
the ambition, expertise and engagement of our people. The
attraction, retention and development of talented technical
individuals is a core growth enabler for the Group. In the first
half, we have taken significant steps with our STEM strategy to
deepen our relationship with key academic and professional bodies
to build the pipeline of our future workforce. This includes a
strategic partnership with the Society of Hispanic Professional
Engineers in the USA, joining the Society of Women Engineers and
retaining our sponsorship of the International Women in Engineering
Day. We have also launched our first online work experience
programme with The Forage, a free global education platform for
college and university students, to support the development of
future STEM students and provide a showcase of careers within the
Group for future talent.
The Spectris Foundation supports STEM provision in the
communities where the Group operates and is now in its second year
of grant making. In the first half, grants were made to STEM India
Foundation to create a phygital lab and the SAE Foundation in the
USA to inspire the next generation in STEM education, through a
hands-on project called A World In Motion.
We continue to work on initiatives to ensure we have an
inclusive and supportive culture where individuals can thrive and
have the development and opportunities to progress their careers. I
am very pleased that we have seen meaningful progress over the past
12 months in the results of our latest,
all-employee engagement survey. We continue to invest in our
Ascend leadership programme, with the first cohort of 80 attendees
halfway through the programme, as well as in our mental health
provision and diversity programme.
We are very cognisant of the potential economic backdrop and the
cost of living challenges that are impacting some of our employees
and have been addressing salaries where appropriate. Our colleagues
in China have also been subject to continued COVID-19 lockdowns and
we have been working closely with them to ensure their continued
safety and mental wellbeing. While we have no employees in Ukraine,
we made a donation of GBP100,000 to the Red Cross as part of the
Disasters Emergency Committee appeal and also matched employee
donations of over GBP11,000 to help provide humanitarian aid.
Changes to Executive Committee
Plans had been underway to run the Industrial Solutions Division
as a more integrated division, with some potential restructuring. A
decision has been made not to pursue this path, and to maintain the
businesses on a stand-alone basis, while continuing to seek further
efficiencies through the deployment of SBS. To take out additional
cost, the three businesses will now report directly to the Chief
Executive and the ISD management layer will be removed. As a
result, Mary Beth Siddons who is on the Spectris Executive
Committee, has decided to leave the Group.
Summary and outlook
Over the past three years, we have transformed the Group into a
more focused, more profitable and more resilient business, with the
ability to compound growth at a higher rate through the cycle.
Today, Spectris is in a position of strength with a robust balance
sheet, well positioned in attractive end markets, with strong
fundamentals, supported by key sustainability themes to deliver
structural growth. We have fantastic, engaged people all
contributing to a purpose-led, high-performance growth culture.
I am pleased with our progress in the first half of 2022. We are
continuing to see healthy demand for our products and services,
with strong LFL growth in both orders and sales. While vigilant to
the macro environment and alert to signs of changes in demand, we
have confidence in our business and have increased our investment
for growth in R&D, to enhance our customer offerings. With our
current order visibility, we expect to deliver high single digit
organic sales growth and margin expansion for the full year,
supported by the Spectris Business System and pricing already in
the order book. The successful sale of Omega delivered significant
shareholder value; demonstrating our continued portfolio
discipline, as we further improve the quality of the Group.
The next stage of our strategy will advance our ambition to be a
leading sustainable business, delivering on our purpose to help
make the world cleaner, healthier and more productive. We will
build on the platform we have created to deliver strong,
sustainable organic growth through the cycle, alongside continued
margin expansion. We look forward to sharing more details at our
upcoming Capital Markets Day in October.
Andrew Heath
Chief Executive
Financial review
Financial performance
Statutory reported sales increased by 6.1% or GBP32.7 million to
GBP570.2 million (H1 2021: GBP537.5 million),
LFL sales increased by GBP52.5 million (+10.7%) with the impact
of disposals, net of acquisitions reducing sales by GBP30.5 million
(-6%) and foreign exchange movements increasing sales by GBP10.7
million (+2%).
The statutory operating profit was GBP54.3 million, a decrease
of GBP1.1 million compared to the H1 2021 statutory operating
profit of GBP55.4 million. Statutory operating margins of 9.5% were
80bps lower than H1 2021 (10.3%). The decrease results from a
GBP8.9 million volume and pricing-driven gross profit increase,
offset by a GBP10.0 million increase in SG&A expenses.
Net transaction-related costs and fair value adjustments were
GBP6.8 million, primarily related to the acquisition of Creoptix,
the disposal of Omega and the aborted proposed offer for Oxford
Instruments plc. The group incurred GBP2.3 million of ongoing
Software as a Service projects in relation to the development of
the ERP solution benefiting both Malvern Panalytical and HBK and
GBP8.8 million of ongoing amortisation of acquisition-related
intangible assets in the period.
2022 2021
Half year Half year
Continuing operations GBPm GBPm
------------------------------------------------ ---------- ----------
Statutory operating profit 54.3 55.4
Restructuring costs - 3.8
Net transaction-related costs and fair value
adjustments 6.8 3.4
Depreciation of acquisition-related fair value
adjustments to property, plant and equipment 0.1 0.1
Configuration and customisation costs carried
out by third parties on material SaaS projects 2.3 -
Amortisation of acquisition-related intangible
assets 8.8 5.4
------------------------------------------------ ---------- ----------
Adjusted operating profit 72.3 68.1
------------------------------------------------ ---------- ----------
Adjusted operating profit increased by 6.2% or GBP4.2 million to
GBP72.3 million (H1 2021: GBP68.1 million).
LFL adjusted operating profit increased by GBP3.6 million
(+5.6%), with the impact of disposals net of acquisitions
decreasing adjusted operating profit by GBP3.2 million (-5%), and
foreign exchange movements increasing adjusted operating profit by
GBP3.8 million (+6%).
Adjusted operating margins remained flat, with LFL adjusted
operating margins lower by 60bps compared to H1 2021. The marginal
decline in the LFL operating margin was due to a 240bps decrease in
LFL gross margin at 55.7% (H1 2021: 58.1%), reflecting the lag
between price increases impacting sales and a high inflationary
cost environment. A planned higher investment in R&D and
increases in cost have resulted in a 6.3% LFL increase in
overheads. Investment in our R&D programmes amounted to GBP47.6
million or 8.3% of sales (H1 2021: GBP40.8 million or 7.6% of
sales), increasing by 18.3% on a LFL basis.
Statutory profit before tax of GBP41.8 million (H1 2021:
GBP181.9 million) is calculated after net finance cost of GBP12.8
million (H1 2021: GBP8.8 million credit), higher due to the
utilisation of borrowing facilities during 2022, whereas H1 2021
included a GBP5.1 million interest credit on release of a provision
on settlement of an EU dividends tax claim. H1 2021 also included a
GBP117.7 million profit on disposal of businesses, predominantly
related to Brüel & Kjær Vibro.
The effective tax rate on adjusted profit before tax for H1 2022
was 22.0% (H1 2021: 21.8%). The effective adjusted tax rate for the
full year is estimated to be 22.0%.
Disposals
The Group announced the disposal of its Omega business on 19
April. This sale completed on 1 July 2022, with the receipt of
headline sales proceeds $525 million (GBP410 million equivalent).
The total sales proceeds received is subject to a customary
completion accounts true-up. The Group has not disposed of any
other businesses in the first half year.
Compliant with IFRS 5, the Omega business has been classified as
a discontinued operation and the assets and liabilities have been
classified as held for sale. The financial statements for the
current and comparative periods in this interim report have been
amended accordingly. The statutory profit after tax from the
discontinued operations was GBP10.2 million (H1 2021: GBP3.9
million).Volume and price driven sales increases were strong across
all regions, especially in North America and China, reflecting
strong customer demand in their core semiconductor market.
Statutory profit benefited from this growth, but was partly offset
by higher material and labour costs.
Cash flow
Adjusted cash flow was GBP27.9 million during the period (H1
2021: GBP79.9 million), resulting in an adjusted cash flow
conversion rate of 39% (H1 2021: 117%). GBP5.1 million higher
EBITDA was offset by GBP43.8 million of higher working capital and
GBP13.3 million higher capital expenditure. The increase in working
capital was driven by higher trade debtors, predominantly as a
result of the higher level of sales in June, a planned stock build
to support the order book growth, as well as forward purchases for
all key components to ensure customer orders are met in the second
half. The higher level of capital expenditure was predominantly as
a result of a $19.9 million (GBP15.3 million equivalent) investment
in a new production facility and headquarters for PMS in
Colorado.
Half year Half year
2022 2021
Adjusted cash flow from continuing operations GBPm GBPm
------------------------------------------------- --------- ---------
Adjusted operating profit 72.3 68.1
Adjusted depreciation and software amortisation1 18.8 17.9
Working capital and other non-cash movements (31.6) 12.2
Capital expenditure, net of grants related to
capital expenditure (31.6) (18.3)
------------------------------------------------- --------- ---------
Adjusted cash flow from continuing operations 27.9 79.9
------------------------------------------------- --------- ---------
Adjusted cash flow conversion from continuing
operations 39% 117%
------------------------------------------------- --------- ---------
1. Adjusted depreciation and software amortisation represent
depreciation of property, plant and equipment, software and
internal development amortisation, adjusted for depreciation of
acquisition-related fair value adjustments to property, plant and
equipment.
Half year Half year
2022 2021
Other cash flows and foreign exchange GBPm GBPm
------------------------------------------------ --------- --------------------------
Tax paid (20.5) (17.2)
Net interest paid on cash and borrowings (0.3) (2.5)
Dividends paid (53.3) (53.6)
Share buyback (150.8) (79.7)
Acquisition of businesses, net of cash acquired (44.3) (1.3)
Acquisition of investment in associate (3.4) -
Transaction-related costs paid (6.0) (9.0)
Proceeds from disposal of equity investments - 38.3
(Outflow)/proceeds from disposal of businesses (15.1) 208.8
SaaS-related cash expenditure (2.3) -
Lease payments and associated interest (7.6) (7.3)
Restructuring costs paid (2.6) (6.8)
Net proceeds from exercise of share options - 0.3
Total other cash flows (306.2) 70.0
Adjusted cash flow from continuing operations 27.9 79.9
Adjusted cash flow from discontinued operations 7.3 13.5
Foreign exchange 4.9 3.3
------------------------------------------------ --------- --------------------------
Increase in net (debt)/cash (266.1) 166.7
------------------------------------------------ --------- --------------------------
During the period, 5,068,643 ordinary shares were repurchased
and cancelled by the Group in relation to the first GBP150 million
tranche of the GBP300 million share buyback programme announced
on
19 April, resulting in a cash outflow of GBP150.8 million. In H1
2021, the Group had a cash outflow of
GBP79.7 million as part of the GBP200 million share buyback
announced on 25 February 2021.
During the period, the Group paid net consideration totalling
GBP34.8 million for the acquisition of Creoptix, GBP8.7 million for
the acquisition of MB connect line and GBP0.8 million of deferred
consideration on acquisitions entered into in prior periods.
Financing and treasury
The Group finances its operations from retained earnings and,
where appropriate, from third-party borrowings. The 30 June 2022
gross debt balance was GBP228.2 million (H1 2021: GBP0.2
million).
In determining the basis of preparation for the Condensed
Consolidated Financial Statements, the Directors have considered
the Group's available resources, current business activities and
factors likely to impact on its future development and performance,
including the impact of economic factors such as rising interest
rates and inflation as well as climate change on the Group, which
are described in the Chief Executive's Review, Financial Review and
Operating Review.
As at 30 June 2022, the Group had GBP411.3 million of committed
facilities, consisting entirely of an
$500.0 million multi-currency revolving credit facility ('RCF')
maturing in July 2025. An amount of
GBP220 million was drawn on the RCF as at 30 June 2022.
The Group regularly monitors its financial position to ensure
that it remains within the terms of its banking covenants. At 30
June 2022, interest cover (defined as adjusted earnings before
interest, tax and amortisation divided by net finance charges) was
144.7 times (31 December 2021: 67 times), against a minimum
requirement of 3.75 times, and leverage (defined as adjusted
earnings before interest, tax, depreciation and amortisation
divided by net cash/(debt)) was 0.6 times (31 December 2021: less
than zero) against a maximum permitted leverage of 3.5 times.
At 30 June 2022, the Group had a cash and cash equivalents
balance of GBP129.9 million (including
GBP7.7 million of cash included in assets held for sale). In
addition to the RCF borrowings of GBP220 million, the Group also
had various uncommitted facilities and bank overdraft facilities
available, of which
GBP8.2 million were utilised, resulting in a net debt position
of GBP98.3 million. This compares to a net cash position of
GBP167.8 million as at 31 December 2021, a decrease of GBP266.1
million. This is, in part, due to the completion of a GBP150
million share buyback, the acquisitions of Creoptix and MB connect
line and payment of the 2021 final dividend in June 2022.
On 1 July 2022, the Group received headline sales proceeds of
$525 million (GBP410 million) for the sale of its Omega business to
Arcline Investment Management. The total sales proceeds received is
subject to a customary completion accounts true-up. All outstanding
drawings on the RCF were immediately repaid from these proceeds and
the remainder invested in interest-bearing deposit accounts.
The Group has prepared and reviewed cash flow forecasts for the
period to 30 June 2025, which reflect forecasted changes in revenue
across its business and compared these to a reverse stress test of
the forecasts to determine the extent of downturn which would
result in a breach of covenants. The reverse stress test does not
take into account any mitigating actions which the Group would
implement in the event of a severe and extended revenue decline,
which would increase the headroom further. This assessment
indicates that the Group can operate within the level of its
current facilities, as set out above, without the need to obtain
any new facilities for a period of not less than 12 months from the
date of this report.
Following this assessment, the Board of Directors are satisfied
that the Group has sufficient resources to continue in operation
for the foreseeable future, a period of not less than 12 months
from the date of this report. Accordingly, they continue to adopt
the going concern basis in relation to this conclusion and
preparing the Condensed Consolidated Financial Statements.
Currency
The Group has both translational and transactional currency
exposures. Translational exposures arise on the consolidation of
overseas company results into Sterling. Transactional exposures
arise where the currency of sale or purchase invoices differs from
the functional currency in which each company prepares its local
accounts. The transactional exposures include situations where
foreign currency denominated trade receivables, trade payables and
cash balances are held.
After matching the currency of revenue with the currency of
costs wherever practical, forward exchange contracts are used to
hedge a proportion of the remaining forecast net transaction
cashflows where there is reasonable certainty of an exposure. At 30
June 2022, approximately 62% of the estimated transactional
exposures for the next 12 months of GBP131.9 million were hedged
using forward exchange contracts, mainly against Sterling, the
Euro, the US Dollar and the Danish Krone.
The largest translational exposures during the period were to
the US Dollar, Euro and Chinese Yuan Renminbi. Translational
exposures are not hedged. The table below shows the average and
closing key exchange rates compared to Sterling .
HY 2022 HY 2021 HY 2022 HY 2021
(average) (average) Change (closing) (closing) Change
---------------------- ----------- ----------- ------- ----------- ----------- ------
US Dollar (USD) 1.30 1.39 (7%) 1.22 1.38 (13%)
Euro (EUR) 1.19 1.15 3% 1.17 1.16 1%
Chinese Yuan Renminbi
(CNY) 8.40 8.99 (7%) 8.14 8.93 (10%)
---------------------- ----------- ----------- ------- ----------- ----------- ------
During the period, currency translation effects resulted in
adjusted operating profit being GBP3.8 million higher (H1 2021:
GBP5.6 million lower) than it would have been if calculated using
prior year exchange rates.
Transactional foreign exchange gains of GBP 1 .4 million (H1
2021: GBPnil) were included in administrative expenses, whilst
sales include a loss of GBP 1.5 million (H1 2021: GBP1.4 million
gain) arising on forward exchange contracts taken out to hedge
transactional exposures in respect of sales.
Capital allocation
During the period, the Group has continued to follow its
approach to capital allocation set out in 2019. The balance sheet
remains strong with net debt to EBITDA of 0.6x at the period end.
Within the year, we have used the cash generated from operations
and disposals to invest in the business, to position it for
stronger through the cycle growth, via a 18% LFL increase in
R&D to drive further innovation and through selected
acquisitions. We continue to look to drive attractive shareholder
returns through a combination of growth and income and reflecting
this have increased the interim dividend by 5% and used the excess
capital following the sale of Omega to return GBP150 million to
shareholders via a share buyback in the first half.
Operating segments - financial summary - continuing Group
Malvern Panalytical HBK Industrial Solutions Total
--------------------- ----------------- ---------------------- ----------------
H1 2022 H1 2021 H1 2022 H1 2021 H1 2022 H1 2021 H1 2022 H1 2021
--------------- ---------- --------- -------- ------- ----------- --------- ------- -------
Sales (GBPm) 209.1 178.5 215.0 188.0 146.1 171.0 570.2 537.5
LFL sales growth
(%) 14% 7% 11% 11%
------------------ ---------- --------- -------- ------- ----------- --------- ------- -------
Statutory
operating profit
(GBPm) 17.7 17.6 16.1 14.9 20.5 22.9 54.3 55.4
Statutory
operating margin
(%) 8.5% 9.9% 7.5% 7.9% 14.0% 13.3% 9.5% 10.3%
------------------ ---------- --------- -------- ------- ----------- --------- ------- -------
Adjusted operating
profit (GBPm) 26.3 22.3 24.2 21.7 21.8 24.1 72.3 68.1
LFL adjusted
operating profit
change (%) 24% (8%) 1% 6%
------------------ ---------- --------- -------- ------- ----------- --------- ------- -------
Adjusted operating
margin (%) 12.6% 12.5% 11.3% 11.5% 14.9% 14.1% 12.7% 12.7%
LFL adjusted
operating
margin
change (bps) 100bps (160bps) (160bps) (60bps)
--------------- ---------- --------- -------- ------- ----------- --------- ------- -------
Sales % of Group
sales 37% 33% 38% 35% 25% 32% 100% 100%
------------------ ---------- --------- -------- ------- ----------- --------- ------- -------
Throughout this Operating Review, all commentary refers to the
adjusted LFL measures unless otherwise stated. A reconciliation of
adjusted measures to statutory measures for all segments can be
found in the appendix.
Malvern Panalytical
Half year Half year Change LFL change
2022 2021 vs 2021 vs 2021
--------------------------- --------- --------- -------- ----------
Statutory reported sales
(GBPm) 209.1 178.5 17% 14%
Adjusted operating profit1
(GBPm) 26.3 22.3 18% 24%
Adjusted operating margin1
(%) 12.6% 12.5% 10bps 100bps
Statutory operating profit
(GBPm) 17.7 17.6 1%
Statutory operating margin
(%) 8.5% 9.9% (140bps)
----------------------------- --------- --------- -------- ----------
1. This is an alternative performance measure ('APM'). APMs are
defined in full and reconciled to the reported statutory measures
in the Appendix to the Financial Statements.
Financial performance
On a statutory basis, reported sales increased 17% to GBP209.1
million, with operating profit at GBP17.7 million, primarily
reflecting the strong end market growth and good operational
performance offset by additional transaction-related costs and ERP
investment. The statutory operating margin was 8.5%, down from 9.9%
in 2021.
Continued robust customer demand, plus market share gains
supported by the positive impact from new products, helped underpin
a strong order intake with 12% growth in LFL orders and a 14%
increase in LFL sales.
All regions saw strong LFL sales growth. Strong demand continued
in all sectors including pharmaceutical. In the advanced materials
sector, strong demand was driven by the semiconductor and energy
technology-focused end markets. Primary materials sector growth was
underpinned by a recovery in the metals, mining and building
materials end markets.
Adjusted operating profit of GBP26.3 million increased by 24% on
a LFL basis and LFL adjusted operating margins rose 100bps,
predominantly reflecting the volume increase, partly offset by
higher investment in R&D and reflecting the acquisition of
Creoptix. Price increases implemented at the start of the year only
started to come through in revenue in May, so will have a greater
impact in the second half.
Delivering the strategy
To support growth at Malvern Panalytical, there has been
increased investment in R&D to both enhance the performance of
existing products and develop new solutions, with software,
services and analytics being key areas of focus. During the first
half, a number of new products have been launched. For the compound
semiconductor industry, we have launched a cleanroom compatibility
option for our X-ray diffraction product. This is rated to ISO
Class 4 and will expand the applicability of our offering within
the customers' typical workflow. To meet the growing demand, the
clean room building facilities at Malvern Panalytical's Almelo site
have been expanded. Sales of the Zetasizer, launched in 2021,
continue to significantly exceed the business plan and new features
have been added to further support its application to the
pharmaceutical industry.
To supplement this organic spend, M&A is being targeted to
expand Malvern Panalytical's offerings in support of its customer
workflow strategy. The pharmaceutical industry is one of the key
strategic focus areas, in particular the instrumentation market for
structure, stability, and affinity measurements, supporting both
small molecule and biologics drug development. In January, Creoptix
AG was acquired to further strengthen and expand our offering in
the affinity space, offering leading analytical tools, software and
consumables for drug binding (i.e. kinetics) measurements. The
combination provides an exciting opportunity to quickly scale
Creoptix's superior technology, in terms of speed and sensitivity,
by leveraging Malvern Panalytical's extensive customer base. The
core Creoptix instrument, WAVE, provides exceptionally high
sensitivity and resolution to study real-time biological
interactions.
In addition to its strategic growth initiatives, to drive
further efficiencies in our operating performance, a programme to
simplify, standardise and automate ways of working across the
organisation is underway, which includes an enterprise-wide ERP
solution. It will provide better access to data, offer scalability
to support Malvern Panalytical's growth ambitions and help deliver
margin expansion. It will also further enhance Malvern
Panalytical's customer engagement, especially as it focuses on
large and strategic accounts, working more closely with the
customer, standardising on Malvern Panalytical's solutions
globally.
In recognition of its standing with customers, at the 2021
Scientists' Choice Awards, Malvern Panalytical won the prestigious
Science Customer Service of the Year award, in recognition of the
consistently positive after-sales feedback it has received from
scientists globally.
Market trends and outlook
Pharmaceutical and food
Sales growth remained robust in the pharmaceutical sector in the
first half of the year. LFL sales to the pharmaceutical sector saw
particularly strong growth in North America, driven by investment
in biologics and onshoring of manufacturing capacity. Growth has
been further driven by the success of our new products like
Zetasizer and OmniTrust software for regulated environments.
The outlook for the pharmaceutical sector remains positive.
Small molecule drugs still represent around two-thirds of
development pipelines and quality control investment is returning
as projects restarted last year, increasing demand for stability
solutions such as our Mastersizer product.
In addition, investment in development and manufacturing
capabilities for the higher growth, large molecule, cell and gene
therapies remains high. This is expected to support an increase in
instrumentation demand and further investment in analytical
capabilities, underpinning the robust opportunity pipeline. For
example, we have been working closely with Particle Works, which
develops and manufactures nanoparticle production platforms for the
pharmaceutical and biotech industries. Its innovative systems are
used to produce lipid nanoparticles, important delivery vectors
for
mRNA-based medicines, such as vaccines and gene therapy.
Demand is also being supported by an increase in onshoring, as
western governments seek to increase supply chain robustness, by
reducing reliance on China for critical pharmaceutical supplies.
For example, the US Senate passed 'innovation and competition'
legislation designed to restore its manufacturing base and
encourage corporation with European partners. This has prompted
investment in pharmaceutical facilities, with key biopharmaceutical
manufacturing capacity being developed in the USA.
Primary materials
Performance in this sector has been more mixed and with a lower
speed of recovery in sales, with strong, but later cycle, order
income. LFL sales were higher year-on-year, although lower into
Asia, reflecting supply chain impacts and the COVID lockdown in
China. In this sector, the aftersales and service revenue
opportunity remains strong, as we look to drive additional service
revenues through our extensive installed base.
The mining, minerals and metals market outlook has become more
optimistic with improved metal prices helping increase exploration
budgets. Our key account management approach and process automation
tools are also helping to drive sales growth.
In oil and petrochemicals, performance has been more variable.
The higher oil price has been supportive and activity levels have
improved, although growth for new capex projects is still to
recover, with companies continuing to concentrate on product
maximisation, productivity and cost constraint. The increased focus
on energy transition has affected this segment, slowing current
investments in analytical solutions, but will create further
opportunities in the near future.
Our strength in process automation and digital solutions, to
help improve quality and yield, while reducing risk and improving
safety, is helping drive demand in these markets. Additionally, the
increasing focus by customers on sustainable practices and
environmental matters will support our growth prospects.
Advanced materials
LFL sales in advanced materials continued the strong growth that
was underway in 2021. Our key areas of focus include
energy/battery/hydrogen and semiconductor, where we are seeing
above-market growth based on our strong domain knowledge and
customer relationships. In this space, we are also well positioned
in academia, with a strong brand image, high precision measurement
and scientific credibility, positioning us well as academia
research flows into end market applications. We have seen increased
demand for both our X-ray systems and laser diffraction
instruments, and a notable order was received for 42 Mastersizer
particle size analysers from a Chinese battery manufacturer.
Demand for emerging battery technologies, electric vehicles and
other new applications is supporting additional capital investment
and certain industry participants have announced large organic
expansions in new battery materials sites. Alongside batteries, as
the energy sector and transport industry seek to mitigate their
environmental impact, we expect fuel cell and green hydrogen
technology to be an element of smart energy infrastructure. Also,
the expansion and onshoring of semiconductor manufacturing
facilities, will continue as digitisation trends drive the
increased supply of semiconductors. Within additive manufacturing,
growth is currently lower, but we expect investment to expand with
various customers and industry participants announcing expanded
capabilities along with new manufacturing facilities.
HBK
Half year Half year Change LFL change
2022 2021 vs 2021 vs 2021
--------------------------- --------- --------- -------- ----------
Statutory reported sales
(GBPm) 215.0 188.0 14% 7%
Adjusted operating profit
1 (GBPm) 24.2 21.7 11% (8%)
Adjusted operating margin
1 (%) 11.3% 11.5% (20bps) (160bps)
Statutory operating profit
(GBPm) 16.1 14.9 8%
Statutory operating margin
(%) 7.5% 7.9% (40bps)
----------------------------- --------- --------- -------- ----------
1. This is an alternative performance measure ('APM'). APMs are
defined in full and reconciled to the reported statutory measures
in the Appendix to the Financial Statements.
Financial performance
Statutory reported sales at HBK increased 14% to GBP215.0
million and statutory operating profit rose to
GBP16.1 millio n from GBP14.9 million, primarily reflecting the
end market growth on operational performan ce, as well as the
absence of restructuring and transaction-related costs, although
the statutory operating margin declined 40bps to 7.5% .
HBK saw continued strong order intake, with a 23% increase in
LFL orders reflecting good customer demand across all regions,
along with share gains, in particular in automotive end of line
testing and agriculture smart sensing. LFL sales grew 7%, being
especially strong in North America, driven by the automotive
transition to electrification increasing demand for torque sensors
and high speed DAQ, and acceleration of smart applications for HBK
sensing technology. Robust demand was seen from automotive
customers, especially for electric vehicle ('EV') projects
including simulators as well as production lines. Sales growth in
machine manufacturing continued, against a tough comparator,
supported by strong demand for our weighing technologies and OEM
sensors, the former including textile manufacturing, and the latter
notably in advanced agriculture. Order growth continued to be ahead
of sales, reflecting longer lead times, as well as a planned higher
weighting of OEM orders, where delivery phasing is longer .
Adjusted operating profit rose 11% to GBP24.2 million, though
was 8% lower on a LFL basis, with LFL adjusted operating margins
160bps lower. The higher sales, plus positive mix and pricing
effects, were more than offset by higher overheads to support order
growth and higher input and production costs.
Delivering the strategy
HBK has been further expanding its breadth of offering with new
and enhanced product launches and a number of bolt-on acquisitions
and partnerships.
VI-grade launched AutoHawk , its new hardware-in-the-loop
solution for automotive applications, based on leading technology
from Concurrent Real-Time. It addresses the need for a flexible
solution that can cost-effectively test and validate EVs and the
function of the battery unit and other power electronics
components. AutoHawk perfectly addresses the industry's demand for
a cost-effective, complete and open solution comprising hardware,
software and integration services.
HBK released the latest version of its Tescia Repetitive Testing
system. Designed for vibration, acoustics and rotating machinery
monitoring and testing, Tescia's comprehensive analysis and
monitoring capabilities provide detailed insight into the live
test, to enable faster testing, improved product quality and time
to market. The latest release allows for integration with weather
and other parameters to analyse all aspects of a live test.
HBK also launched the C5 reference force sensor range, used to
compare calibration systems, and as a reference transducer for
calibration machines using hydraulic force. The very high
performance sensor integrates with HBK's measurement amplifier and
software to create a unique precision measurement chain.
A purchase agreement has been signed to acquire Dytran
Instruments, Inc, a leading designer and manufacturer of
piezo-electric and MEMS-based accelerometers and sensors for
measuring dynamic force, pressure, and vibration. Its products are
used in a broad range of applications in the space, aerospace,
industrial and automotive industries in both product development
testing and embedded monitoring solutions. The acquisition
strengthens HBK's piezo-electric sensor offering, adds new MEMS
capability and expands sales into North America. The combination
will strengthen HBK's position in the US space, aerospace, and
defence industries, as well as expand Dytran's growth, by
leveraging HBK's existing global sales channels, providing enhanced
customer offerings and solutions to enable accelerated product
development.
HBK signed a joint venture agreement with DEWESoft, a leading
manufacturer of data acquisition ('DAQ') systems, to accelerate its
new Fusion DAQ hardware platform, and to create a new open industry
standard for DAQ hardware products. The joint venture, to be known
as Blueberry, comprises employees from both HBK and DEWESoft,
working together to design scalable DAQ ecosystems for both parent
companies. Blueberry will allow HBK to complete its Fusion hardware
platform range earlier than previously expected, by standardising
modular designs. The Fusion product line will retain its distinct
HBK identity and performance, however time to market, its open
standard functionality and commonality of the basic components will
benefit both companies' respective customers. Alongside this, HBK
plans to launch new data management and connectivity products to
solve the customer's data challenge, following the agreement signed
last year with VIMANA, a provider of software and cloud services
for smart manufacturing.
HBK acquired a minority stake in CM Labs Inc, a manufacturer of
turnkey solutions for operator training simulators in the
construction and port equipment markets. Within the virtual test
division, VI-grade's core simulator products are currently focused
on product development and motorsports, and this investment allows
us to explore operator training segments where there is
considerable overlap.
Alongside product developments, initiatives to further
strengthen and develop the organisation are being implemented, with
simpler and faster processes, providing even greater customer
response. The new go-to-market model and CRM system are being
rolled out now, enhancing the sales and marketing effort to further
drive growth and strengthen customer relationships. HBK has also
embarked on driving further efficiencies in its operating
performance, with a programme to simplify, standardise and automate
ways of working across the organisation, which includes an
enterprise-wide standard business processes, underpinned by an ERP
solution . This transition will result in the deployment of one
common ERP platform for HBK, following a similar approach to
Malvern Panalytical.
Market trends and outlook
Automotive
The automotive sector saw strong demand with significant order
and sales growth in the first half, reflecting the market
recovery.
HBK's virtual test division booked a number of large orders,
including for its full scale, DiM400 simulator, and saw good order
flow momentum; a contrast to the first half of 2021 when COVID-19
restrictions limited customer access to its SIM-centres, delaying
large simulator orders. Recent key wins were to Ford to install a
simulator at its Dearborn development centre and to automotive
engineering services company HORIBA MIRA for the DiM250 simulator,
the first facility of its kind installed in the UK. This will
enable customers to significantly increase the speed of vehicle
development, reducing the design phase cost and carbon footprint by
minimising the prototype fleets.
In physical test, there was a similar strong performance in the
first half, with notable orders for EV production testing system
orders, for our GenHS and QuantumX data acquisition systems, as
well as for vibration test equipment.
We continue to expect strong and growing demand for testing,
driven by the increasing pace of new EV model launches and
increasing demand for ADAS capabilities. Automotive OEMs are
committing to increased development and production of EVs, with
newcomers continuing to enter this market. This has led to growth
in both R&D and production budgets for EV technology and ADAS
capabilities. These new technologies have complex testing
requirements, requiring significant domain expertise. HBK is well
positioned across the physical and simulated testing space to
support customers with their development challenges. Also, the
speed of development in pure EV and HEV technologies is prompting
manufacturers to increase investment in the R&D of batteries,
where HBK's battery solutions for mechanical vibration and
electrical testing are particularly relevant.
Machine manufacturing
Demand from machine manufacturers continued to be elevated.
Against an extremely strong comparator in first half 2021, HBK
posted moderate but robust LFL sales growth. LFL sales to this
sector have been buoyant since 2020, helped by HBK's focus on
selected high value asset markets, which has driven demand for its
weighing technologies overall, and specifically for smart OEM-type
solutions in medical and healthcare applications. HBK's reputation
in providing durable and reliable sensors and application know-how,
for process optimisation is supporting customers to improve their
applications. Resilient end-market growth driven by emerging
economies and rising consumer preference is supporting the positive
outlook, further underpinned by the strong fit of our sensors in a
broad range of applications, such as food production, medical
equipment and semiconductor manufacturing.
Aerospace and defence
L FL sales increased in the first half, where a good pipeline of
larger project orders won in 2021 were delivered, along with
smaller orders received in the half. The highly complex testing
requirements in these sectors requires very sophisticated sensors
supporting demand for HBK's breadth of testing solutions. Demand in
defence and satellite/space markets spending has continued to be
resilient, with key orders received in the first half including
NASA Jet Propulsion Lab and Airbus Helicopter, which will ship in
subsequent periods.
Consumer electronics and telecoms
LFL sales into electronics and telecoms customers were lower
year-on-year with growth in Asia but down in North America and
Europe. A notable order was to a large smartphone manufacturer for
a series of acoustic/sound test equipment (acoustic camera, HATS,
sound level meters) to locate and map the sound of its smartphone's
unique dual-speaker design and present this at the product launch.
Demand for high quality, smart consumer electronics products
requires audio quality testing in both R&D and production
applications, supporting demand for HBK's market-leading acoustic
testing solutions.
Industrial Solutions
Half year Half year Change LFL change
2022 2021 vs 2021 vs 2021
----------------------------- --------- --------- -------- ----------
Statutory reported sales
(GBPm) 146.1 171.0 (15%) 11%
Adjusted operating profit(1)
(GBPm) 21.8 24.1 (10%) 1%
Adjusted operating margin(1)
(%) 14.9% 14.1% 80bps (160bps)
Statutory operating profit
(GBPm) 20.5 22.9 (10%)
Statutory operating margin
(%) 14.0% 13.3% 70bps
------------------------------- --------- --------- -------- ----------
1. This is an alternative performance measure ('APM'). APMs are
defined in full and reconciled to the reported statutory measures
in the Appendix to the Financial Statements.
Financial performance
Statutory reported sales decreased 15% to GBP146.1 million,
primarily reflecting a 26% decrease from the 2021 divestments of
B&K Vibro, ESG Solutions, Millbrook and NDC Technologies.
Statutory operating profit decreased to GBP20.5 million from
GBP22.9 million, with the statutory operating margin at 14.0%,up
70bps year-on-year.
Strong demand from semiconductor and pharmaceutical customers
continued, further enhancing a record order book, with LFL orders
for the division up 28%. LFL sales increased 11%. PMS had the
strongest performance given its exposure to these two end markets.
LFL sales were strongest into Asia, with Europe and North America
broadly flat. LFL sales into energy and utilities increased, with
order growth into this sector stronger as the market recovers.
Adjusted operating profit increased 1% on a LFL basis to GBP21.8
million, while LFL adjusted operating margins decreased 160bps.
This primarily resulted from the sales increase offset by lower
gross margin, reflecting higher production costs, and higher
overheads and investment, in part to support the order book
expansion. It also reflected the impact of the disposals which
enhanced the margin, but was offset by a higher burden of central
costs.
Delivering the strategy
ISD is made up of three, high quality, specialist businesses,
PMS, Servomex and Red Lion Controls, centred around the provision
of high precision, in-line sensing and monitoring solutions.
Plans had been underway to run ISD as a more integrated
division, with some potential restructuring. A decision has been
made not to pursue this path, and to maintain the businesses on a
stand-alone basis, while continuing to seek further efficiencies
through the deployment of SBS. To take out additional cost, the
three businesses will now report directly to the Chief Executive
and the ISD management layer will be removed. Plans to strengthen
our services provision will carry on and we will continue to invest
organically to grow these businesses.
Servomex has been capitalising on its new range of gas purity
analysers, the Ultra Oxygen and Moisture range, which has driven
order growth above that of the market in semiconductor. In April,
it launched the Laser 3 Plus Environmental, an ammonia CEMS
(continuous emissions monitoring system) analyser which forms a key
part of its three-phase strategy for clean air and is the latest
solution for accurate ammonia measurements in nitrous oxide
reduction processes.
To expand its offering, Red Lion acquired MB connect line GmbH
('MB connect line'), whose high security hardware and software
solutions enhance Red Lion's Industrial IoT portfolio. The addition
of MB connect line builds on the existing strategic collaboration
between the two companies and expands Red Lion's portfolio by
adding a full complement of products in industrial cyber-security
and offering customers a portal for remote monitoring and
configuration. Customers will be able to connect to their
production assets with secure remote access solutions.
At Servomex, Hummingbird Sensing Technology won the Queen's
Award for Enterprise, the UK's highest accolade for business
success. The award recognised Hummingbird's significant growth in
international trade over the past six years, partly attributable to
how Hummingbird responded to COVID-19, meeting a surge in demand
for its sensors, as the global need for medical equipment reached
an all-time high.
Market trends and outlook
Semiconductor and electronic s
Sales into semiconductor customers continued to see strong
growth, notably in Asia, with robust demand for PMS' liquids
instruments and Servomex's purity range. There are large growing
semiconductor manufacturing markets in China, where we are seeing
an increase in activity from local, non-traditional, smaller
Chinese chip or chip related manufacturers, leading to an
expectation that these markets will grow faster in China than the
rest of the world.
PMS achieved market share gains, due to its leading product
sensitivity and the strong backlog it had entering 2021. The sales
pipeline funnel has continued to expand, being driven by investment
programmes by major semiconductor manufacturers, and demand for its
Chem-20 and Ultra-DI 20 products.
Servomex has seen a similarly high level of LFL sales growth in
Asia. A key order was secured with a large industrial gas
manufacturer for its DF Series oxygen and moisture analysers to be
used in a major semiconductor manufacturer's facility.
The trend for regional onshoring investments in new fabs to
protect chip supply continues to further support demand. This trend
is underpinned by new legislation in the USA and Europe (CHIPS Act)
supporting funding for large-scale investments in production
capacities to ensure the security of supply, which could lead to
new locations of customer concentration.
Pharmaceutical and life sciences
Demand also remained strong in the pharmaceutical and life
sciences sectors driving LFL growth in both sales and orders; up
notably at PMS, especially for its aerosol products, and in Asia.
Pharmaceutical investments in Asia remain at high levels,
particularly in biological manufacturing.
PMS is focused on aseptic pharmaceutical manufacturers and
suppliers, and the strategy of providing a more complete sterility
assurance solution has driven growth in sales by reducing risk of
poor product quality and regulatory compliance. In addition,
collaboration with OEM suppliers has resulted in notable orders
from filling-machine and isolator manufacturers.
At Servomex, Hummingbird order growth has started to ease, as
expected, given the reducing demand for ventilators.
Energy and utilities
Sales to energy and utilities continued an improving trend
following growth in the second half of 2021, as the hydrocarbon
sector recovers. LFL sales to energy customers at Servomex were up
year-on-year with strong growth in Asia, especially China. For Red
Lion, there has been recent high demand for automation products
driving additional opportunities for its HMI products.
Servomex closed a major order for its OxyExact 2000 models and
associated services for a new PTA plant in India. A major order was
also placed by a major US steel manufacturer for its SERVOTOUGH
2500s and Oxy 1910s analysers, sampling systems and spares , to aid
their direct iron reduction process and deliver the lowest CO2
emission process in the steelmaking industry. This demonstrates how
effective solutions for process control, safety and quality can
help customers meet environmental challenges and the energy
transition, as well as ensure regulatory compliance, in a wide
range of midstream and downstream applications. Red Lion received a
large order from a North American producer of gas compression
systems to enable remote access and asset management.
Industrial production
Red Lion posted higher LFL sales with order growth much higher,
being up in all regions. Order backlog continues to be notably
above historical levels. Orders of its new product, the FlexEdge
Intelligent Edge Automation Platform launched in 2021, have been
strong. Its smart-device connectivity enables customers to remotely
gather the process insights they need to increase productivity.
Derek Harding
Chief Financial Officer
Principal Risks and Uncertainties
A number of potential risks and uncertainties exist which could
have a material impact on the Group's performance over the second
half of the financial year and could cause actual results to differ
materially from expected and historical results. The Group has
processes in place 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 on pages 48-52 of the 2021 Annual Report and Accounts
which is available on the Group's website at www.spectris.com. The
Group has reviewed these risks and concluded that they will
continue to remain relevant for the second half of the financial
year. 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 2021 Annual Report.
The full list of principal risks relevant as at the half year
comprises:
-- Strategic transformation. Failure to successfully deliver the
Group strategy, including business transformation and key mergers,
acquisitions and divestment activity.
-- Cyber threat. Failure to appropriately protect critical
information and other assets from cyber threats, including external
hacking, cyber fraud, demands for ransom payments and
inadvertent/intentional electronic leakage of critical data.
-- Compliance. Failure to comply with laws and regulations,
leading to reputational damage, substantial fines and potential
market exclusion.
-- Political. Material adverse changes in the geopolitical
environment putting at risk our ability to execute our strategy.
Includes trade protectionism, punitive tax/regulatory regimes, and
general heightened tension between trading parties or blocs.
-- Market/financial shock. Material adverse changes in market
conditions, such as economic recession, inflation, sudden negative
investor sentiment and currency fluctuation.
-- Talent and capabilities. Failure to attract, retain, and
deploy the necessary talent to deliver Group strategy.
-- Business disruption. Failure to appropriately prepare for and
respond to a crisis or major disruption to key operations either
across the Group, in a key region/location, or via a critical
supplier.
-- Climate change. Failure to respond appropriately, and
sufficiently, to climate change risks or failure to identify the
associated potential opportunities in assisting others manage their
climate agendas.
During 2022, we have seen an increase in gross risk in a number
of areas, including political and market risk, cyber threat and
business disruption. These risks are subject to Executive oversight
and formal assessment, and we continue to review the effectiveness
of existing controls over those risks and to identify further
actions where appropriate in order to manage our net exposure.
Responsibility statement of the Directors in respect of the
Interim report
We confirm that to the best of our knowledge:
a) the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting';
b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
and their impact during the first six months and description of the
principal risks and uncertainties for the remaining six months of
the year); and
c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related party
transactions and changes therein).
By order of the Board
Andrew Heath Derek Harding
Chief Executive Chief Financial Officer
31 July 2022
Independent Review Report to Spectris PLC
Conclusion
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 2022 which comprises the Condensed
Consolidated Income Statement, Condensed Consolidated Statement of
Comprehensive Income, the Condensed Consolidated Statement of
Financial Position, the Condensed Consolidated Statement of Changes
in Equity and the Condensed Consolidated Statement of Cash Flows
and related notes 1 to 12.
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 2022 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making inquiries, 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 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.
As disclosed in note 1, the annual financial statements of the
Group will be prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion related to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE (UK), however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the Group a conclusion on the
condensed set of financial statement in the half-yearly financial
report. Our conclusion, including our Conclusions Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council. Our work
has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review
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 formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
31 July 2022
Condensed Consolidated Income Statement (unaudited)
For the six months ended 30 June 2022
(Restated)(1) (Restated)(1)
2022 2021 2021
Half year Half year Full year
------------------------------------------ ---- --------- ------------- -------------
Continuing operations Note GBPm GBPm GBPm
------------------------------------------ ---- --------- ------------- -------------
Revenue 2 570.2 537.5 1,163.0
Cost of sales (253.0) (229.2) (487.5)
--------------------------------------------- ---- --------- ------------- -------------
Gross profit 317.2 308.3 675.5
--------------------------------------------- ---- --------- ------------- -------------
Indirect production and engineering
expenses (53.7) (44.8) (92.6)
Sales and marketing expenses (110.4) (109.2) (222.2)
Administrative expenses (98.8) (98.9) (220.8)
--------------------------------------------- ---- --------- ------------- -------------
Operating profit 2 54.3 55.4 139.9
--------------------------------------------- ---- --------- ------------- -------------
Share of results of associates 7 0.1 - -
Profit on disposal of businesses 0.2 117.7 226.5
Financial income 3 0.3 11.9 12.8
Finance costs 3 (13.1) (3.1) (5.4)
--------------------------------------------- ---- --------- ------------- -------------
Profit before tax 41.8 181.9 373.8
--------------------------------------------- ---- --------- ------------- -------------
Taxation charge 4 (12.6) (5.5) (38.2)
--------------------------------------------- ---- --------- ------------- -------------
Profit for the period from continuing
operations 29.2 176.4 335.6
Profit from discontinued operations 8 10.2 3.9 11.3
Profit for the period from continuing
and discontinued operations attributable
to owners of the Company 39.4 180.3 346.9
Earnings per share
From continuing operations
Basic 6 26.5p 152.4p 295.2p
Diluted 6 26.4p 151.9p 294.1p
From continuing operations and discontinued
operations
Basic 6 35.8p 155.8p 305.1p
Diluted 6 35.6p 155.3p 304.0p
Dividends
Interim and final dividends proposed/paid
for the period (per share) 5 24.1p 23.0p 71.8p
Dividends paid during the period
(per share) 5 48.8p 46.5p 69.5p
1. The Omega reportable segment has been classified as a discontinued
operation under IFRS 5, following the announcement and completion
of its disposal during 2022. As a result, the income statement-related
financial data for the six months ended 30 June 2021 and twelve
months ended 31 December 2021 have been represented to show continuing
operations where required to by IFRS 5 throughout this interim report.
Further details are provided in note 8 to the Interim Condensed
Consolidated Financial Statements.
Condensed Consolidated Statement of Comprehensive Income
(unaudited)
For the six months ended 30 June 2022
2022 2021 2021
Half year Half year Full year
---------------------------------------------- --------- --------- ---------
GBPm GBPm GBPm
---------------------------------------------- --------- --------- ---------
Profit for the period attributable
to owners of the Company 39.4 180.3 346.9
Other comprehensive income:
Items that will not be reclassified
to the Condensed Consolidated Income
Statement:
Re-measurement of net defined benefit
obligation 10.5 2.2 (1.8)
Fair value gain/(loss) and foreign
exchange movements translation on investment
in equity instruments designated as
at fair value through other comprehensive
income 4.3 (0.6) (1.8)
Tax (charge)/credit on items above (3.1) (0.1) 0.7
----------------------------------------------- --------- --------- ---------
11.7 1.5 (2.9)
Items that are or may be reclassified
subsequently to the Condensed Consolidated
Income Statement:
Net loss on effective portion of changes
in fair value of forward exchange contracts
on cash flow hedges (23.8) - (1.9)
Foreign exchange movements on translation
of overseas operations 83.1 (27.0) (25.1)
Currency translation differences transferred
to profit on disposal of businesses - (3.8) (4.8)
Tax credit on items above 4.6 - 0.3
----------------------------------------------- --------- --------- ---------
63.9 (30.8) (31.5)
---------------------------------------------- --------- --------- ---------
Total other comprehensive income/(loss) 75.6 (29.3) (34.4)
----------------------------------------------- --------- --------- ---------
Total comprehensive income for the
period attributable to owners of the
Company 115.0 151.0 312.5
----------------------------------------------- --------- --------- ---------
Condensed Consolidated Statement of Changes in Equity
(unaudited)
For the six months ended 30 June 2022
Capital
Share Share Retained Translation Hedging Merger redemption Total
capital premium earnings reserve reserve reserve reserve equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- -------- -------- --------- ----------- -------- -------- ----------- -------
At 1 January 2022 5.8 231.4 957.6 66.2 (3.5) 3.1 0.7 1,261.3
Profit for the
period - - 39.4 - - - - 39.4
Other comprehensive
income/(loss) - - 11.3 83.5 (19.2) - - 75.6
---------------------- -------- -------- --------- ----------- -------- -------- ----------- -------
Total comprehensive
income/(loss)
for the period - - 50.7 83.5 (19.2) - - 115.0
Transactions with
owners recorded
directly in equity:
Equity dividends
paid by the Company
(see note 5) - - (53.3) - - - - (53.3)
Own shares acquired
for share buyback
programme (see
note 10) (0.3) - (150.8) - - - 0.3 (150.8)
Share-based payments,
net of tax - - 4.4 - - - - 4.4
At 30 June 2022 5.5 231.4 808.6 149.7 (22.7) 3.1 1.0 1.176.6
---------------------- -------- -------- --------- ----------- -------- -------- ----------- -------
For the six months ended 30 June 2021
Capital
Share Share Retained Translation Hedging Merger redemption Total
capital premium earnings reserve reserve reserve reserve equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- -------- -------- --------- ----------- -------- -------- ----------- -------
At 1 January 2021 6.0 231.4 901.5 98.0 (1.9) 3.1 0.5 1,238.6
Prior period restatement
(see note 1) - - (18.9) - - - - (18.9)
At 1 January 2021
(restated) 6.0 231.4 882.6 98.0 (1.9) 3.1 0.5 1,219.7
Profit for the
period - - 180.3 - - - - 180.3
Other comprehensive
income/(loss) - - 1.5 (30.8) - - - (29.3)
------------------------- -------- -------- --------- ----------- -------- -------- ----------- -------
Total comprehensive
income/(loss)
for the period - - 181.8 (30.8) - - - 151.0
Transactions with
owners recorded
directly in equity:
Equity dividends
paid by the Company
(see note 5) - - (53.6) - - - - (53.6)
Own shares acquired
for share buyback
programme (see
note 10) (0.1) - (97.8) - - - 0.1 (97.8)
Share-based payments,
net of tax - - 4.6 - - - - 4.6
Proceeds from exercise
of equity-settled
share options - - 0.3 - - - - 0.3
------------------------- -------- -------- --------- ----------- -------- -------- ----------- -------
At 30 June 2021
(restated) 5.9 231.4 917.9 67.2 (1.9) 3.1 0.6 1,224.2
------------------------- -------- -------- --------- ----------- -------- -------- ----------- -------
For the year ended 31 December 2021
Capital
Share Share Retained Translation Hedging Merger redemption Total
capital premium earnings reserve reserve reserve reserve equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- -------- -------- --------- ----------- -------- -------- ----------- -------
At 1 January 2021 6.0 231.4 882.6 98.0 (1.9) 3.1 0.5 1,219.7
Profit for the
year - - 346.9 - - - - 346.9
Other comprehensive
loss - - (1.0) (31.8) (1.6) - - (34.4)
----------------------- -------- -------- --------- ----------- -------- -------- ----------- -------
Total comprehensive
income/(loss)
for the year - - 345.9 (31.8) (1.6) - - 312.5
Transactions with
owners recorded
directly in equity:
Equity dividends
paid by the Company
(see note 5) - - (79.0) - - - - (79.0)
Own shares acquired
for share buyback
programme (see
note 10) (0.2) - (201.3) - - - 0.2 (201.3)
Share-based payments,
net of tax - - 9.1 - - - - 9.1
Proceeds from exercise
of equity-settled
share options - - 0.3 - - - - 0.3
----------------------- -------- -------- --------- ----------- -------- -------- ----------- -------
At 31 December
2021 5.8 231.4 957.6 66.2 (3.5) 3.1 0.7 1,261.3
----------------------- -------- -------- --------- ----------- -------- -------- ----------- -------
Condensed Consolidated Statement of Financial Position
(Unaudited)
As at 30 June 2022
(Restated)(1)
2022 2021 2021
Half year Half year Full year
--------------------------------------------------- ---- --------- ------------- ---------
Note GBPm GBPm GBPm
--------------------------------------------------- ---- --------- ------------- ---------
ASSETS
Non-current assets
Goodwill 571.3 564.4 631.5
Other intangible assets 158.0 96.7 169.1
Property, plant and equipment 157.6 151.1 150.5
Right-of-use assets 60.2 31.3 60.5
Investment in equity instruments 28.6 24.1 24.3
Investment in debt instruments 23.0 23.0 23.0
Investment in associate 7 3.5 - -
Other receivables 4.2 - -
Deferred tax assets 18.6 16.1 21.2
--------------------------------------------------- ---- --------- ------------- ---------
1,025.0 906.7 1,080.1
--------------------------------------------------- ---- --------- ------------- ---------
Current assets
Inventories 231.3 178.0 187.9
Current tax assets 3.0 5.1 5.7
Trade and other receivables 331.5 275.3 315.9
Derivative financial instruments - 1.9 0.3
Cash and cash equivalents 122.2 273.0 167.8
Assets held for sale 8 219.2 - 10.4
--------------------------------------------------- ---- --------- ------------- ---------
907.2 733.3 688.0
Total assets 1,932.2 1,640.0 1,768.1
--------------------------------------------------- ---- --------- ------------- ---------
LIABILITIES
Current liabilities
Borrowings (8.0) (0.2) -
Derivative financial instruments (25.7) - (1.2)
Trade and other payables (335.4) (309.2) (330.2)
Lease liabilities (16.5) (13.4) (16.6)
Current tax liabilities (9.7) (4.8) (28.1)
Provisions (15.9) (14.7) (17.6)
Liabilities held for sale 8 (31.9) - -
--------------------------------------------------- ---- --------- ------------- ---------
(443.1) (342.3) (393.7)
--------------------------------------------------- ---- --------- ------------- ---------
Net current assets 464.1 391.0 294.3
--------------------------------------------------- ---- --------- ------------- ---------
Non-current liabilities
Borrowings (220.2) - -
Other payables (14.7) (20.3) (13.8)
Lease liabilities (48.7) (25.0) (49.3)
Provisions (4.2) (4.6) (4.7)
Retirement benefit obligations (11.3) (17.8) (22.3)
Deferred tax liabilities (13.4) (5.8) (23.0)
--------------------------------------------------- ---- --------- ------------- ---------
(312.5) (73.5) (113.1)
--------------------------------------------------- ---- --------- ------------- ---------
Total liabilities (755.6) (415.8) (506.8)
--------------------------------------------------- ---- --------- ------------- ---------
Net assets 1,176.6 1,224.2 1,261.3
--------------------------------------------------- ---- --------- ------------- ---------
EQUITY
Share capital 5.5 5.9 5.8
Share premium 231.4 231.4 231.4
Retained earnings 808.6 917.9 957.6
Translation reserve 149.7 67.2 66.2
Hedging reserve (22.7) (1.9) (3.5)
Merger reserve 3.1 3.1 3.1
Capital redemption reserve 1.0 0.6 0.7
--------------------------------------------------- ---- --------- ------------- ---------
Total equity attributable to owners of the Company 1,176.6 1,224.2 1,261.3
--------------------------------------------------- ---- --------- ------------- ---------
1. See note 1 for details of the SaaS-related prior period restatement.
----------------------------------------------------------------------------------- ---------
Condensed Consolidated Statement of Cash Flows (Unaudited)
For the six months ended 30 June 2022
2022 2021 2021
Half year Half year Full year
------------------------------------- ---- --------- --------- ---------
Note GBPm GBPm GBPm
------------------------------------- ---- --------- --------- ---------
Cash generated from operations 9 43.4 96.7 191.6
Net income taxes paid (20.5) (17.2) (32.2)
------------------------------------- ---- --------- --------- ---------
Net cash inflow from operating
activities 22.9 79.5 159.4
------------------------------------- ---- --------- --------- ---------
Cash flows (used in)/from investing
activities
Purchase of property, plant
and equipment and intangible
assets (32.3) (19.1) (35.3)
Proceeds from disposal of property,
plant and equipment and software 13.2 - -
Finance sublease receivable
collected, net of initial direct
costs - - 0.1
Acquisition of businesses, net
of cash acquired 7 (44.3) (1.3) (135.5)
Acquisition of investment in
an associate 7 (3.4) - -
Proceeds from disposal of equity
investments - 38.3 38.3
(Outflow)/ from disposal of
businesses, net of tax paid
of GBP12.6m (2021 Half year
and 2021 Full year: GBPnil) (15.1) 208.8 333.7
Interest received 0.3 0.1 0.5
------------------------------------- ---- --------- --------- ---------
Net cash flows (used in)/from investing
activities (81.6) 226.8 201.8
------------------------------------------- --------- --------- ---------
Cash flows from/(used in) financing
activities
Interest paid on borrowings (0.6) (2.6) (3.4)
Interest paid on lease liabilities (1.3) (0.7) (1.8)
Dividends paid 5 (53.3) (53.6) (79.0)
Share buyback purchase of shares 10 (150.8) (79.7) (201.3)
Net proceeds from exercise of
share options - 0.3 0.3
Payments on principal portion
of lease liabilities (6.3) (6.6) (13.0)
Proceeds from borrowings 326.1 - 70.0
Repayment of borrowings (98.7) (99.8) (169.8)
------------------------------------- ---- --------- --------- ---------
Net cash flows from/( used in) financing
activities 15.1 (242.7) (398.0)
------------------------------------------- --------- --------- ---------
Net (decrease)/increase in cash and
cash equivalents (43.6) 63.6 (36.8)
Cash and cash equivalents at
beginning of period 167.8 210.9 210.9
Effect of foreign exchange rate
changes 5.7 (1.5) (6.3)
------------------------------------- ---- --------- --------- ---------
Cash and cash equivalents at
end of period (1) 129.9 273.0 167.8
------------------------------------- ---- --------- --------- ---------
1. Cash and cash equivalents in the Condensed Consolidated
Statement of Cash Flows at 30 June 2022 consisted of GBP122.2
million of cash and cash equivalents included in current assets and
GBP7.7 million of cash and cash equivalents included in assets held
for sale. Cash and cash equivalents in the Condensed Consolidated
Statement of Cash Flows at 30 June 2021 and 31 December 2021
consisted solely of cash and cash equivalents included in current
assets.
Notes to the accounts
1. Basis of preparation and accounting policies
a) Basis of accounting
The Condensed Consolidated Interim Financial Statements of the
Company for the six months ended 30 June 2022 comprise the Company
and its subsidiaries, together referred to as the 'Group'. These
Condensed Consolidated Interim Financial Statements are presented
in millions of Sterling rounded to the nearest one decimal place,
which is the Group's presentational currency. The Consolidated
Financial Statements of the Group for the year ended 31 December
2021 are available upon request from the Company's registered
office at Melbourne House, 44-46 Aldwych, London, WC2B 4LL, and on
the Company's website at www.spectris.com.
These Condensed Consolidated Interim Financial Statements have
been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Conduct Authority and with IAS 34, 'Interim
Financial Reporting', as adopted by the United Kingdom. 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
2021.
The Condensed Consolidated Financial Statements have been
prepared using consistent accounting policies with those of the
previous financial year except for the adoption of new accounting
standards and interpretations noted below.
The Condensed Consolidated Interim Financial Statements for the
six-month period ended
30 June 2022 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 2021 are derived from the Company's statutory accounts for
that financial year. 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 Group's financial risk management objectives and policies
are consistent with those disclosed in the Consolidated Financial
Statements of the Group for the year ended 31 December 2021. These
Condensed Consolidated Interim Financial Statements were approved
by the Board of Directors on 31 July 2022.
New standards and interpretations applied for the first time
There were no standards, amendments or interpretations applied
for the first time that had a material impact for the Group.
New standards and interpretations not yet applied
There were no new or revised IFRSs, amendments or
interpretations in issue but not yet effective that are potentially
material for the Group and which have not yet been applied.
Change in accounting policy - Software as a Service ('SaaS')
arrangement
As disclosed in the 2021 Annual Report, the Group changed its
accounting policy relating to the capitalisation of certain
software costs during the twelve months ended 31 December 2021.
This change follows the IFRIC Interpretation Committee's agenda
decision published in April 2021 and relates to the capitalisation
of costs of configuring or customising application software under
'Software as a Service' ('SaaS') arrangements. Refer to the 2021
Annual Report for details of the new accounting policy applied and
the transitional method adopted.
1. Basis of preparation and accounting policies (continued)
The change in accounting policy led to adjustments amounting to
a GBP25.7 million reduction in intangible assets, a GBP18.9 million
reduction in retained earnings, a GBP2.6 million reduction in
deferred tax liabilities, a GBP1.6 million increase in deferred tax
assets, a GBP1.1 million reduction in current tax liabilities and a
GBP1.5 million increase in trade and other receivables recognised
in the 30 June 2021 Condensed Consolidated Statement of Financial
Position. The Condensed Consolidated Income Statement and the
Condensed Statement of Other Comprehensive Income for the six
months ended 30 June 2021 have not been restated, as the impact on
them is immaterial.
As previously Impact of
reported restatement Restated
H1 2021 H1 2021 H1 2021
Cost GBPm GBPm GBPm
------------------------------------ ------------- ------------ --------
Other intangible assets 122.4 (25.7) 96.7
Deferred tax assets 14.5 1.6 16.1
Trade and other receivables 273.8 1.5 275.3
Current tax liability (5.9) 1.1 (4.8)
Deferred tax liabilities (8.4) 2.6 (5.8)
Other assets/(liabilities) 846.7 - 846.7
------------------------------------ ------------- ------------ --------
Net assets 1,243.1 (18.9) 1,224.2
------------------------------------ ------------- ------------ --------
Retained earnings 936.8 (18.9) 917.9
Other equity balances 306.3 - 306.3
------------------------------------ ------------- ------------ --------
Total equity attributable to owners
of the Company 1,243.1 (18.9) 1,224.2
------------------------------------ ------------- ------------ --------
b) Going concern
The Group finances its operations from retained earnings and,
where appropriate, from third-party borrowings. The 30 June 2022
gross debt balance was GBP228.2 million.
In determining the basis of preparation for the Condensed
Consolidated Financial Statements, the Directors have considered
the Group's available resources, current business activities and
factors likely to impact on its future development and performance,
including the impact of economic factors such as rising interest
rates and inflation as well as climate change on the Group, which
are described in the Chief Executive's Review, Financial Review and
Operating Review.
As at 30 June 2022, the Group had GBP411.3 million of committed
facilities, consisting entirely of an
$500.0 million multi-currency revolving credit facility ('RCF')
maturing in July 2025. An amount of
GBP220 million was drawn on the RCF as at 30 June 2022.
The Group regularly monitors its financial position to ensure
that it remains within the terms of its banking covenants. At 30
June 2022, interest cover (defined as adjusted earnings before
interest, tax and amortisation divided by net finance charges) was
144.7 times (31 December 2021: 67 times), against a minimum
requirement of 3.75 times, and leverage (defined as adjusted
earnings before interest, tax, depreciation and amortisation
divided by net cash/(debt)) was 0.6 (31 December 2021: less than
zero) against a maximum permitted leverage of 3.5 times.
At 30 June 2022, the Group had a cash and cash equivalents
balance of GBP129.9 million (including
GBP7.7 million of cash included in assets held for sale). In
addition to the RCF borrowings of GBP220 million, the Group also
had various uncommitted facilities and bank overdraft facilities
available, of which
GBP8.2 million were utilised, resulting in a net debt position
of GBP98.3 million. This compares to a net cash position of
GBP167.8 million as at 31 December 2021, a decrease of GBP266.1
million. This is, in part, due to the completion of a GBP150
million share buyback, the acquisitions of Creoptix and MB connect
line and payment of the 2021 final dividend in June 2022.
1. Basis of preparation and accounting policies (continued)
On 1 July 2022, the Group received headline sales proceeds of
$525 million (GBP410 million) for the sale of its Omega business to
Arcline Investment Management. The total sales proceeds received is
subject to a customary completion accounts true-up. All outstanding
drawings on the RCF were immediately repaid from these proceeds and
the remainder invested in interest-bearing deposit accounts.
The Group has prepared and reviewed cash flow forecasts for the
period to 30 June 2025, which reflect forecasted changes in revenue
across its business and compared these to a reverse stress test of
the forecasts to determine the extent of downturn which would
result in a breach of covenants. The reverse stress test does not
take into account any mitigating actions which the Group would
implement in the event of a severe and extended revenue decline,
which would increase the headroom further. This assessment
indicates that the Group can operate within the level of its
current facilities, as set out above, without the need to obtain
any new facilities for a period of not less than 12 months from the
date of this report.
Following this assessment, the Board of Directors are satisfied
that the Group has sufficient resources to continue in operation
for the foreseeable future, a period of not less than 12 months
from the date of this report. Accordingly, they continue to adopt
the going concern basis in relation to this conclusion and
preparing the Condensed Consolidated Financial Statements.
c) Seasonality
The Group's financial results and cash flows have, historically,
been subject to seasonal trends between the first and second half
of the financial year. Historically, the second half of the
financial year sees higher revenue and profitability. There is no
assurance that this trend will continue in the future.
d) Critical accounting judgments and key sources of estimation uncertainty update
In determining and applying accounting policies, judgement is
often required where the choice of specific policy, assumption or
accounting estimate to be followed could materially affect the
reported amounts of assets, liabilities, income and expenses,
should it be determined that a different choice be more
appropriate. Estimates and assumptions are reviewed on an ongoing
basis and are based on historical experience and various other
factors that are believed to be reasonable under the
circumstances.
The Group's critical accounting judgments and other key sources
of estimation uncertainty remain the same as those as set out in
the Group's Consolidated Financial Statements for the year
ended
31 December 2021.
2. Operating segments
The Group has three continuing reportable segments, as described
below. The segmental business structure reflects the internal
reporting provided to the Chief Operating Decision Maker
(considered to be the Board) on a regular basis to assist in making
decisions on capital allocated to each segment and to assess
performance. The operating segment results include an allocation of
head office expenses. The following summarises the operations in
each of the Group's reportable segments:
-- The Malvern Panalytical business provides products and
services that enable customers to determine structure, composition,
quantity and quality of particles and materials during their
research and product development processes, when assessing
materials before production, or during the manufacturing process.
The operating companies in this segment are Malvern Panalytical and
Concept Life Sciences.
-- The HBK business supplies test, measurement and analysis
equipment, software and services for product design optimisation,
and manufacturing control. The operating companies in this segment
are Hottinger, Brüel & Kjær and VI-grade.
-- The Industrial Solutions division ('ISD') comprises a
portfolio of high-value, niche businesses. The operating companies
in this segment are Particle Measuring Systems, Red Lion Controls,
Servomex, Brüel & Kjær Vibro (disposed 1 March 2021), ESG
Solutions (disposed 3 May 2021), Millbrook (disposed
2 February 2021) and NDC Technologies (disposed 1 November
2021).
The Omega business, which had previously been disclosed as a
reportable segment, has now been classified as a discontinued
operation under IFRS 5, following the announcement and completion
of its disposal on 1 July 2022 (after the balance sheet date) and
therefore excluded from the segmental analysis. As a result, the
financial data for the six months ended 30 June 2021 and twelve
months ended 31 December 2021 have been represented to show
continuing operations where required to by IFRS 5, including a
reclassification of continuing head office expenses that had
previously been allocated to the Omega reportable segment to the
three continuing reportable segments. Further details of
discontinued operations are provided in note 8 to the Interim
Condensed Consolidated Financial Statements.
2022
Malvern Industrial Half year
Panalytical HBK Solutions Total
Information about continuing
reportable segments GBPm GBPm GBPm GBPm
---------------------------------- ------------ ----- ---------- ----------
Segment revenues 209.2 215.1 146.2 570.5
Inter-segment revenue (0.1) (0.1) (0.1) (0.3)
----------------------------------- ------------ ----- ---------- ----------
External revenue 209.1 215.0 146.1 570.2
----------------------------------- ------------ ----- ---------- ----------
Statutory operating profit 17.7 16.1 20.5 54.3
Share of results of associates - 0.1 - 0.1
Profit on disposal of businesses1 0.2
Financial income1 0.3
Finance costs1 (13.1)
----------------------------------- ------------ ----- ---------- ----------
Profit before tax1 41.8
Taxation charge1 (12.6)
----------------------------------- ------------ ----- ---------- ----------
Profit after tax from continuing
operations1 29.2
----------------------------------- ------------ ----- ---------- ----------
1. Not allocated to reportable segments
2. Operating segments (continued)
2021
Malvern Industrial Half year
Panalytical HBK Solutions Total
Information about continuing
reportable segments GBPm GBPm GBPm GBPm
---------------------------------- ------------ ----- ---------- ----------
Segment revenues 178.6 188.1 171.2 537.9
Inter-segment revenue (0.1) (0.1) (0.2) (0.4)
----------------------------------- ------------ ----- ---------- ----------
External revenue 178.5 188.0 171.0 537.5
----------------------------------- ------------ ----- ---------- ----------
Statutory operating profit 17.6 14.9 22.9 55.4
Profit on disposal of businesses1 117.7
Financial income1 11.9
Finance costs1 (3.1)
----------------------------------- ------------ ----- ---------- ----------
Profit before tax1 181.9
Taxation charge1 (5.5)
----------------------------------- ------------ ----- ---------- ----------
Profit after tax from continuing
operations1 176.4
----------------------------------- ------------ ----- ---------- ----------
1. Not allocated to reportable segments
2021
Malvern Industrial Full year
Panalytical HBK Solutions Total
Information about continuing
reportable segments GBPm GBPm GBPm GBPm
---------------------------------- ------------ ----- ---------- ----------
Segment revenues 401.3 425.7 336.5 1,163.5
Inter-segment revenue (0.1) (0.2) (0.2) (0.5)
----------------------------------- ------------ ----- ---------- ----------
External revenue 401.2 425.5 336.3 1,163.0
----------------------------------- ------------ ----- ---------- ----------
Statutory operating profit 55.3 38.6 46.0 139.9
Profit on disposal of businesses1 226.5
Financial income1 12.8
Finance costs1 (5.4)
----------------------------------- ------------ ----- ---------- ----------
Profit before tax1 373.8
Taxation charge1 (38.2)
----------------------------------- ------------ ----- ---------- ----------
Profit after tax from continuing
operations1 335.6
----------------------------------- ------------ ----- ---------- ----------
1 Not allocated to reportable segments
Geographical segments
The Group's operating segments are each located in several
geographical locations and sell to external customers in all parts
of the world. No individual country amounts to more than 3% of
revenue by location of customer, other than those noted below. The
following is an analysis of revenue from continuing operations by
geographical destination.
2022 2021 2021
Half year Half year Full year
GBPm GBPm GBPm
---------------------- ---------- ----------- ----------
UK 26.0 26.1 51.2
Germany 53.6 51.3 111.2
France 19.3 18.9 41.4
Rest of Europe 77.7 83.4 166.8
USA 151.2 129.8 289.4
Rest of North America 14.0 13.8 28.6
Japan 31.8 30.6 66.1
China 96.8 91.7 200.7
South Korea 26.0 17.2 45.2
Rest of Asia 49.6 50.4 108.4
Rest of the
world 24.2 24.3 54.0
------------------------ ---------- ----------- ----------
570.2 537.5 1,163.0
---------------------- ---------- ----------- ----------
3. Financial income and finance costs
2022 2021 2021
Half year Half year Full year
Financial income from continuing
operations GBPm GBPm GBPm
---------------------------------------- ---------- ---------- ----------
Interest receivable (0.3) (0.1) (0.5)
Interest credit on release of provision
on settlement of EU dividends tax
claim - (5.1) (5.1)
Net gain on retranslation of short-term
inter-company loan balances - (6.7) (7.2)
------------------------------------------ ---------- ---------- ----------
(0.3) (11.9) (12.8)
---------------------------------------- ---------- ---------- ----------
2021
2022 2021 Full
Half year Half year year
Finance costs from continuing operations GBPm GBPm GBPm
------------------------------------------- ---------- ---------- -----
Interest payable on loans and overdrafts 1.1 2.5 3.6
Net loss on retranslation of short-term
inter-company loan balances 10.7 - -
Unwinding of discount factor on lease
liabilities 1.2 0.6 1.6
Net interest cost on pension plan
obligations 0.1 - 0.2
Other finance costs - - -
------------------------------------------- ---------- ---------- -----
13.1 3.1 5.4
------------------------------------------- ---------- ---------- -----
Net finance costs/(credit) from continuing
operations 12.8 (8.8) (7.4)
--------------------------------------------- ---------- ---------- -----
4. Taxation
The tax charge for the six months to 30 June 2022 has been
calculated using the effective tax rate which is expected to apply
to the Group for the full year, using tax rates substantively
enacted at 30 June 2022. The effective tax rate applied to adjusted
profit before tax for the half year is 22.0% (Half year 2021:
21.8%; Full year 2021: 21.5%). The effective tax rate has been
estimated using full year projections of adjusted profit before tax
by territory and the tax rates applying in those territories. The
tax rates applied to adjusting items are established on an
individual basis for each adjusting item.
A reconciliation of the tax charge on adjusted profit to the
actual tax charge is presented below:
2022 2021 2021
Half year Half year Full year
GBPm GBPm GBPm
-------------------------------------------------- ---------- ---------- ----------
Tax charge on adjusted profit before tax 15.5 14.2 39.8
Tax credit on amortisation of acquisition-related
intangible assets (2.1) (1.0) (2.9)
Tax credit on net transaction-related costs
and fair value adjustments (0.9) (0.1) (3.0)
Tax charge on profit on disposal of businesses 0.1 - 14.2
Tax charge on retranslation of short-term
inter-company loan balances 0.5 0.3 0.3
Tax credit on configuration and customisation
costs carried out by third parties on material
SaaS projects (0.5) - (1.4)
Tax credit on release of provision on settlement
of EU dividends tax claim - (7.0) (7.0)
Tax charge on fair value through profit and
loss movements on equity investments - - 0.9
Tax credit on restructuring costs - (0.9) (2.7)
-------------------------------------------------- ---------- ---------- ----------
Total tax charge 12.6 5.5 38.2
-------------------------------------------------- ---------- ---------- ----------
5. Dividends
2022
Half 2021 2021
year Half year Full year
------------------------------------------------
Amounts recognised and paid as distributions
to owners of the Company in the period GBPm GBPm GBPm
------------------------------------------------ ----- ---------- ----------
Final dividend for the year ended 31 December
2021 of 48.8p per share 53.3 - -
Final dividend for the year ended 31 December
2020 of 46.5p per share - 53.6 53.6
Interim dividend for the year ended 31 December
2021 of 23.0p per share - - 25.4
53.3 53.6 79.0
------------------------------------------------ ----- ---------- ----------
An interim 2022 dividend of 24.1p per share has been declared
and will be payable on
11 November 2022 to ordinary shareholders on the register at the
close of business on 7 October 2022.
6. Earnings per share
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).
Diluted profit per share amounts are calculated by dividing the
net profit attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the period but
adjusted for the effects of dilutive options. This additional
adjustment is not made when there is a net loss attributable to
ordinary shareholders.
2022
Basic earnings per share from continuing Half 2021 2021
operations year Half year Full year
---------------------------------------------- ----- ---------- ----------
Profit after tax from continuing operations
(GBPm) 29.2 176.4 335.6
Weighted average number of shares outstanding
(millions) 110.0 115.7 113.7
----------------------------------------------- ----- ---------- ----------
Basic earnings per share from continuing
operations (pence) 26.5 152.4 295.2
----------------------------------------------- ----- ---------- ----------
Diluted earnings per share from continuing 2022 2021 2021
operations Half year Half year Full year
------------------------------------------------ -------------- ---------- ------------
Profit after tax from continuing operations
(GBPm) 29.2 176.4 335.6
------------------------------------------------ -------------- ---------- ------------
Basic weighted average number of shares
outstanding (millions) 110.0 115.7 113.7
Weighted average number of dilutive 5p
ordinary shares under option (millions) 1.4 0.5 0.5
Weighted average number of 5p ordinary
shares that would have been issued at average
market value from proceeds of dilutive
share options (millions) (0.6) (0.1) (0.1)
------------------------------------------------ -------------- ---------- ------------
Diluted weighted average number of shares
outstanding (millions) 110.8 116.1 114.1
------------------------------------------------ -------------- ---------- ------------
Diluted earnings per share from continuing
operations (pence) 26.4 151.9 294.1
------------------------------------------------ -------------- ---------- ------------
2022
Basic earnings per share from discontinued Half 2021 2021
operations year Half year Full year
----------------------------------------------- ---- ---------- ---------- ----------
Profit after tax from discontinued operations
(GBPm) 10.2 3.9 11.3
Weighted average number of shares outstanding
(millions) 110.0 115.7 113.7
------------------------------------------------- ---------- ---------- ----------
Basic earnings per share from discontinued
operations (pence) 9.3 3.4 9.9
------------------------------------------------- ---------- ---------- ----------
Diluted earnings per share from discontinued 2022 2021 2021
operations Half year Half year Full year
---------------------------------------------- ---------- ---------- ----------
Profit after tax from discontinued operations
(GBPm) 10.2 3.9 11.3
----------------------------------------------- ---------- ---------- ----------
Diluted weighted average number of shares
outstanding (millions) 110.8 116.1 114.1
----------------------------------------------- ---------- ---------- ----------
Diluted earnings per share from discontinued
operations (pence) 9.2 3.4 9.9
----------------------------------------------- ---------- ---------- ----------
The denominators used for diluted earnings per share from
discontinued operations are the same as those used for diluted
earnings per share from continuing operations.
7. Acquisitions
Business combinations
Creoptix
On 7 January 2022, the Group acquired 100% of the share capital
of Creoptix AG ('Creoptix') for net consideration of GBP37.0
million, made up of GBP37.3 million gross consideration (consisting
of GBP35.1 million of cash paid and GBP2.2 million of contingent
consideration) less GBP0.3 million of cash acquired. Creoptix is a
bioanalytical sensor company, which provides solutions to
accelerate discovery and development of new pharmaceutical drugs,
substances and products. The transaction is in line with Spectris'
strategy to make synergistic acquisitions to enhance and grow its
businesses. Creoptix will be integrated into the Malvern
Panalytical reportable segment and cash generating unit.
The excess of the fair value of consideration paid over the fair
value of the net tangible assets acquired is represented by a
technology intangible asset and goodwill. Goodwill arising is
attributable to the assembled workforce, in process research,
expected future customer relationships and synergies from
cross-selling goods and services.
In the Condensed Consolidated Income Statement for the six
months ended 30 June 2022, sales of
GBP1.3 million and statutory operating loss of GBP2.0 million
have been included for the acquisition of Creoptix. As Creoptix was
acquired near to the start of the current reporting period, Group
revenue and statutory operating profit for the six months ended 30
June 2022 would be the same had this acquisition taken place on the
first day of the financial period.
Where appropriate, a detailed exercise has been undertaken to
assess the fair value of assets acquired and liabilities assumed,
supported by the use of third-party experts. The valuation of the
above intangible and tangible assets requires the use of
assumptions and estimates. Intangible asset assumptions consist of
future growth rates, expected inflation and attrition rates,
discount rates used and useful economic lives. Due to their
contractual due dates, the fair value of receivables approximates
to the gross contractual amounts receivable. The amount of gross
contractual receivables note expected to be recovered is
immaterial. There are no material contingent liabilities recognised
in accordance with IFRS 3 (Revised).
Acquisition-related costs (included in administrative expenses)
amount to GBP1.8 million.
MB connect line
On 31 March 2022, the Group acquired 100% of the share capital
of MB connect line GmbH
('MB connect') for net consideration of GBP8.7 million, made up
of GBP9.0 million gross consideration in cash less GBP0.3 million
net cash acquired. There was no contingent consideration recognised
on this acquisition. MB connect is a leading provider of secure
connections between machines and plants for remote access, data
collection, and M2M-communication. The transaction is in line with
Spectris' strategy to make synergistic acquisitions to enhance and
grow its businesses.
MB connect will be integrated into the ISD reportable segment
and the Red Lion Controls cash generating unit.
The excess of the fair value of consideration paid over the fair
value of the net tangible assets acquired is represented by the
following intangible assets: customer-related relationships,
technology, brand and goodwill. Goodwill arising is attributable to
the assembled workforce, synergies from cross-selling goods and
services and cost synergies.
In the Condensed Consolidated Income Statement for the six
months ended 30 June 2022, sales of
GBP1.4 million and statutory operating profit of GBP0.2 million
have been included for the acquisition of
MB connect. Group revenue and statutory operating profit from
continuing operations for the six months ended 30 June 2022 would
have been GBP571.3 million and GBP54.5 million, respectively, had
this acquisition taken place on the first day of the financial
year.
7. Acquisitions (continued)
Where appropriate, a detailed exercise has been undertaken to
assess the fair value of assets acquired and liabilities assumed,
supported by the use of third-party experts. The valuation of the
above intangible and tangible assets requires the use of
assumptions and estimates. Intangible asset assumptions consist of
future growth rates, expected inflation and attrition rates,
discount rates used and useful economic lives. Due to their
contractual due dates, the fair value of receivables approximates
to the gross contractual amounts receivable. The amount of gross
contractual receivables note expected to be recovered is
immaterial. There are no material contingent liabilities recognised
in accordance with IFRS 3 (Revised).
Acquisition-related costs (included in administrative expenses)
amount to GBP0.1 million.
The fair values included in the table below relate to the
acquisition of Creoptix and MB connect during the period:
Total
Creoptix MB Connect fair value
2022 GBPm GBPm GBPm
------------------------------------------------------- ---------- ----------- ------------
Intangible assets 18.5 5.1 23.6
Property, plant and equipment 0.1 1.2 1.3
Right of use assets 1.0 - 1.0
Inventories 0.6 0.3 0.9
Trade and other receivables 1.6 0.1 1.7
Cash and cash equivalents 0.3 0.3 0.6
Borrowings - (0.1) (0.1)
Trade and other payables (1.8) (0.1) (1.9)
Lease liabilities (1.0) - (1.0)
Current tax liabilities - (0.1) (0.1)
Deferred tax liabilities (0.9) (1.6) (2.5)
------------------------------------------------------- ---------- ----------- ------------
Net assets acquired 18.4 5.1 23.5
Goodwill 18.9 3.9 22.8
------------------------------------------------------- ---------- ----------- ------------
Gross consideration 37.3 9.0 46.3
Adjustment for cash acquired (0.3) (0.3) (0.6)
------------------------------------------------------- ---------- ----------- ------------
Net consideration 37.0 8.7 45.7
------------------------------------------------------- ---------- ----------- ------------
2022 2021 2021
Half year Half year Full year
Analysis of cash outflow in Consolidated
Statement of Cash Flows from business combinations GBPm GBPm GBPm
------------------------------------------------------- ---------- ----------- ------------
Gross consideration in respect of acquisitions
during the period 46.3 - 146.1
Adjustment for net cash acquired (0.6) - (12.3)
------------------------------------------------------- ---------- ----------- ------------
Net consideration in respect of acquisitions
during the period 45.7 - 133.8
Deferred and contingent consideration on acquisitions
included in net consideration during the period
to be paid in future periods (2.2) - -
------------------------------------------------------- ---------- ----------- ------------
Cash paid during the period in respect of
acquisitions during the period 43.5 - 133.8
Cash paid in respect of prior years' acquisitions 0.8 1.3 1.7
------------------------------------------------------- ---------- ----------- ------------
Net cash outflow relating to acquisitions 44.3 1.3 135.5
------------------------------------------------------- ---------- ----------- ------------
7. Acquisitions (continued)
Investment in associates
CM Labs Simulations
On 8 April 2022, the Group acquired 19.4% (17.2% fully diluted)
of the shares of CM Labs Simulations Inc. ('CM Labs') for total
consideration of CAD4.3 million (GBP2.6 million), settled in cash.
CM Labs is a manufacturer of turnkey solutions for operator
training simulators in the heavy equipment industries. These
simulators are developed using CM Labs' proprietary Vortex
software, which is also commercially available as a machinery
virtual prototyping software platform for tasks ranging from
product development to creation of custom simulators. Its principal
place of business is Montreal, Quebec, Canada. As a result of the
rights and powers attached to the Group's shareholding the Group
has concluded that it has significant influence and, as result,
will equity account for its share of CM Labs' results, as an
investment in associate.
The investment carrying value at 30 June 2022 is GBP3.0 million,
consisting of the initial purchase consideration of GBP2.6 million,
transaction costs of GBP0.3 million and GBP0.1 million share of
profit after taxation. Transactions with related party associates
consisted of GBP0.2 million sales and GBP0.2 million expenses.
Future acquisitions
Dytran Instruments
On 10 May 2022, the Group announced that it had signed a
purchase agreement to acquire 100% of Dytran Instruments, Inc.
('Dytran') for a headline purchase consideration of $82 million
(GBP66 million), valuing the business at 15.8x EBITDA for the 12
months ending March 2022. The transaction is subject to regulatory
approval and is anticipated to close in the second half of 2022.
Dytran is a leading designer and manufacturer of piezo-electric and
MEMS-based accelerometers and sensors for measuring dynamic force,
pressure and vibration, with its largest market in North America.
Dytran will be integrated into the HBK reportable segment and cash
generating unit.
8. Discontinued operations and disposal groups held for sale
On 19 April 2022, the Group announced that it had entered into a
sale agreement to divest of the Omega reportable segment. The
divestment was effected to offer a better opportunity to generate
returns for shareholders and further enhance Group margins. The
disposal was completed on
1 July 2022, after the end of the reporting period covered by
these Condensed Consolidated Interim Financial Statements. The
above operations have been classified discontinued operations in
the Condensed Consolidated Income Statement and have been
classified as a disposal group held for sale and presented
separately in the Condensed Consolidated Statement of Financial
Position.
The headline sales proceeds received on 1 July 2022, which are
subject to a customary completion accounts true-up, were $525
million (c.GBP410 million), substantially in excess of the carrying
amount of the related net assets and accordingly no impairment
losses have been recognised on the classification of these
operations as held for sale.
The results of the discontinued operations, which have been
included in the profit for the period, were as follows:
2022 2021 2021
Half year Half year Full year
GBPm GBPm GBPm
----------------------------------------------- ---------- ---------- ----------
Revenue 73.9 64.3 129.0
Expenses included in adjusted operating profit (59.9) (55.6) (109.2)
Adjusted operating profit 14.0 8.7 19.8
Other expenses (1.1) (3.6) (5.0)
----------------------------------------------- ---------- ---------- ----------
Profit before tax 12.9 5.1 14.8
Attributable tax expense (2.7) (1.2) (3.5)
----------------------------------------------- ---------- ---------- ----------
Profit after tax from discontinued operations
for the period attributable to owners of the
Company 10.2 3.9 11.3
----------------------------------------------- ---------- ---------- ----------
8. Discontinued operations and disposal groups held for sale
(continued)
During the period, discontinued operations contributed GBP6.5
million (Half year 2021: GBP13.9 million; Full year 2021: GBP23.5
million) to the Group's net cash inflow from operating activities,
paid GBP0.8 million (Half year 2021: GBP0.8 million; Full year
2021: GBP1.8 million) in respect of investing activities and paid
GBP0.5 million (Half year 2021: GBP0.4 million; Full year 2021:
GBP0.9 million) in respect of financing activities.
The major classes of assets and liabilities comprising the
operations classified as held for sale at
30 June 2022 are as follows:
2022
Half year
GBPm
---------------------------------------------- ----------
Goodwill 121.3
Other intangible assets 39.9
Property, plant and equipment 20.5
Right-of-use assets 1.8
Inventories 20.8
Current tax assets 0.1
Trade and other receivables 7.1
Cash and cash equivalents 7.7
Total assets classified as held for sale 219.2
Trade and other payables (19.9)
Lease liabilities (3.2)
Deferred tax liabilities (8.6)
Provisions (0.2)
Total liabilities classified as held for sale (31.9)
Net assets of disposal groups 187.3
---------------------------------------------- ----------
Assets and liabilities classified as held for sale include the
Omega business and the Group's former headquarters building in
Egham, Surrey, UK.
9. Cash generated from operations
2022 2021 2021
Half year Half year Full year
Note GBPm GBPm GBPm
--------------------------------------------------------------------- ---- ---------- ---------- ----------
Cash flows from operating activities
Profit after tax 39.4 180.3 346.9
Adjustments for:
Taxation charge 15.3 6.7 41.7
Profit on disposal of businesses (0.2) (117.7) (226.5)
Share of results of associates 7 (0.1) - -
Finance costs 3 13.2 3.2 5.6
Financial income 3 (0.3) (11.9) (12.8)
Depreciation and impairment of property, plant and equipment 16.9 15.5 26.4
Amortisation and impairment of intangible assets 12.6 14.2 23.9
Transaction-related fair value adjustments 0.2 (0.1) 0.2
(Profit)/loss on disposal of property, plant and equipment (2.1) - 0.1
Equity-settled share-based payment expense 5.0 3.8 7.8
--------------------------------------------------------------------- ---- ---------- ---------- ----------
Operating cash flow before changes in working capital and provisions 99.9 94.0 213.3
(Increase)/decrease in trade and other receivables (12.8) 9.9 (40.2)
(Increase) in inventories (51.7) (13.8) (30.3)
Increase in trade and other payables 10.3 12.0 50.3
(Decrease) in provisions and retirement benefits (2.3) (5.4) (1.5)
--------------------------------------------------------------------- ---- ---------- ---------- ----------
Cash generated from operations 43.4 96.7 191.6
--------------------------------------------------------------------- ---- ---------- ---------- ----------
10. Share buyback, treasury shares and employee benefit trust
shares
During the half year ended 30 June 2022, 5,068,643 ordinary
shares were repurchased and cancelled by the Group as part of the
GBP300 million share buyback programme announced on 19 April 2022,
resulting in a cash outflow of GBP150.8 million, including
transaction fees of GBP1.0 million.
During the half year ended 30 June 2021, the Group repurchased
2,537,540 ordinary shares and cancelled 2,417,148, resulting in a
cash outflow of GBP79.7 million as part of the GBP200 million share
buyback announced on
25 February 2021. This was concluded in the Full year 2021 with
5,596,739 shares repurchased and cancelled, resulting in a cash
outflow of GBP201.3 million.
At 30 June 2022, the Group held 4,664,727 treasury shares (Half
year 2021: 4,807,386; Full year 2021: 4,767,106). During the
period, 102,379 (Half year 2021: 127,181; Full year 2021: 167,461)
of these shares were issued to satisfy options exercised by, and
SIP Matching Shares awarded to, employees which were granted under
the Group's share schemes.
11. Financial instruments
The following tables show the fair value measurement of
financial instruments by level following the fair value
hierarchy:
-- Level 1: quoted listed stock exchange prices (unadjusted) in
active markets for identical assets;
-- Level 2: inputs other than quoted prices within level 1 that
are observable for the asset or liability, either directly (i.e.,
as prices) or indirectly (i.e. derived from prices); and
-- Level 3: inputs for assets and liabilities derived from
valuation techniques that include inputs for the assets or
liability that are not based on observable market data.
30 June 2022
Level 2
Level 1 fair value fair value Level 3 fair value Carrying amount
GBPm GBPm GBPm GBPm
------------------------------------------------ ------------------ ----------- ------------------ ---------------
Fair value hierarchy categorisation of financial
instruments measured at fair value
Deferred and contingent consideration payable on
acquisitions - - (2.9) (2.9)
Investment in equity instruments designated at
initial recognition at fair value through other
comprehensive income 0.9 - 27.7 28.6
Investment in debt instruments - - 23.0 23.0
Financial instruments included in assets held
for sale (see note 8) - 7.7 - 7.7
Cash and cash equivalents (excluding GBP7.7
million classified as assets held for sale) - 122.2 - 122.2
Floating rate borrowings and bank overdrafts - (228.2) - (228.2)
Forward exchange contract liabilities - (25.7) - (25.7)
------------------------------------------------ ------------------ ----------- ------------------ ---------------
(75.3)
------------------------------------------------ ------------------ ----------- ------------------ ---------------
There were no movements between the different levels of the fair
value hierarchy during the period.
The fair value of deferred and contingent consideration is
determined by considering the performance expectations of the
acquired entity or the likelihood of non-financial integration
milestones whilst applying the entity-specific discount rates. The
unobservable inputs are the projected forecast measures that are
assessed on a periodic basis. Changes in the fair value of deferred
and contingent consideration relating to updated projected forecast
performance measures are recognised in the Consolidated Income
Statement within administrative expenses in the Consolidated Income
Statement in the period that the change occurs.
The level 1 investments in equity instruments is calculated
using quoted market prices in an active market at the balance sheet
date. The level 3 investment in equity instruments is measured at
fair value, using the income approach, with the key input being a
discounted cash flow.
11. Financial instruments (continued)
The investment in debt instruments is measured at fair value by
establishing an appropriate market yield. The key inputs used were
synthetic credit ratings and market interest rates.
The fair value of cash and cash equivalents (including cash and
cash equivalents included in assets held for sale) approximates to
the carrying amount because of the short maturity of these
instruments.
The fair value of floating rate borrowings and bank overdrafts
approximates to the carrying amount because interest rates are at
floating rates where payments are reset to market rates at
intervals of less than one year.
The fair value of forward exchange contracts is determined using
discounted cash flow techniques based on readily available market
data.
The fair value measurement methodology of all financial
instruments remains consistent with the approach disclosed in the
Consolidated Financial Statements for the financial year ended 31
December 2021.
30 June 2021
Level 2
Level 1 fair value fair value Level 3 fair value Carrying amount
GBPm GBPm GBPm GBPm
-------------------------------------- ------------------ ----------- ------------------ ---------------
Fair value hierarchy categorisation of
financial instruments measured at fair
value
Deferred and contingent consideration
payable on acquisitions - - (1.6) (1.6)
Investment in equity instruments
designated at initial recognition at
fair value through other
comprehensive income 0.5 - 23.6 24.1
Investment in debt instruments - - 23.0 23.0
Forward exchange contract assets - 1.9 - 1.9
Cash and cash equivalents - 273.0 - 273.0
Floating rate borrowings and bank
overdrafts - (0.2) - (0.2)
-------------------------------------- ------------------ ----------- ------------------ ---------------
320.2
-------------------------------------- ------------------ ----------- ------------------ ---------------
31 December 2021
Level 2
Level 1 fair value fair value Level 3 fair value Carrying amount
GBPm GBPm GBPm GBPm
-------------------------------------- ------------------ ----------- ------------------ ---------------
Fair value hierarchy categorisation of
financial instruments measured at fair
value
Deferred and contingent consideration
payable on acquisitions - - (1.5) (1.5)
Investment in equity instruments
designated at initial recognition at
fair value through other
comprehensive income 1.2 - 23.1 24.3
Investment in debt instruments - - 23.0 23.0
Forward exchange contract assets - 0.3 - 0.3
Cash and cash equivalents - 167.8 - 167.8
Forward exchange contract liabilities - (1.2) - (1.2)
-------------------------------------- ------------------ ----------- ------------------ ---------------
212.7
-------------------------------------- ------------------ ----------- ------------------ ---------------
2022 2021 2021
Half year Half year Full year
GBPm GBPm GBPm
-------------------------------------------------------------------------- ---------- ---------- ----------
Reconciliation of level 3 fair value for investment in equity instruments
At 1 January 23.1 - -
Investment in equity instruments recognised on disposal of business - 25.0 25.0
Fair value gain 4.1 - -
Foreign exchange difference 0.5 (1.4) (1.9)
--------------------------------------------------------------------------- ---------- ---------- ----------
At end of period 27.7 23.6 23.1
--------------------------------------------------------------------------- ---------- ---------- ----------
11. Financial instruments (continued)
2022 2021 2021
Half year Half year Full year
GBPm GBPm GBPm
------------------------------------------------------------------------------- ---------- ---------- ----------
Reconciliation of level 3 fair value for deferred and contingent consideration
payable on
acquisitions
At 1 January (1.5) (3.1) (3.1)
Deferred and contingent consideration arising from current period acquisitions
payable in
future periods (2.2) - -
Deferred and contingent consideration paid in the current period relating to
previous periods'
acquisitions 0.8 1.3 1.7
Costs charged to the Condensed Consolidated Income Statement:
Subsequent adjustment on acquisitions (0.2) 0.1 (0.2)
Foreign exchange difference 0.2 0.1 0.1
-------------------------------------------------------------------------------- ---------- ---------- ----------
At end of period (2.9) (1.6) (1.5)
-------------------------------------------------------------------------------- ---------- ---------- ----------
12. Post balance sheet events
On 1 July 2022, the Group received headline sales proceeds of
$525 million (GBP410 million) for the sale of its Omega business to
Arcline Investment Management. The total sales proceeds received is
subject to a customary completion accounts true-up. All outstanding
drawings on the RCF were immediately repaid from these proceeds and
the remainder invested in interest-bearing deposit accounts. See
note 8 for further details.
Appendix - Alternative performance measures
Policy
Spectris uses adjusted figures as key performance measures in
addition to those reported under IFRS, as management believe these
measures enable management and stakeholders to assess the
underlying trading performance of the businesses as they exclude
certain items that are considered to be significant in nature
and/or quantum, foreign exchange movements and the impact of
acquisitions and disposals.
The alternative performance measures ('APMs') are consistent
with how the businesses' performance is planned and reported within
the internal management reporting to the Board and Operating
Committees. Some of these measures are used for the purpose of
setting remuneration targets. The key APMs that the Group uses
include like-for-like ('LFL') organic performance measures and
adjusted measures for the income statement together with adjusted
financial position and cash flow measures. Explanations of how they
are calculated and how they are reconciled to an IFRS statutory
measure are set out below.
Adjusted measures
The Group's policy is to exclude items that are considered to be
significant in nature and/or quantum and where treatment as an
adjusted item provides stakeholders with additional useful
information to assess the period-on-period trading performance of
the Group. The Group excludes such items which management have
defined for 2022 and 2021 as:
-- restructuring costs from significant programmes;
-- amortisation of acquisition-related intangible assets;
-- depreciation of acquisition-related fair value adjustments to
property, plant and equipment;
-- transaction-related costs, deferred and contingent
consideration fair value adjustments;
-- configuration and customisation costs carried out by third
parties on material SaaS projects;
-- profits or losses on termination or disposal of
businesses;;
-- unrealised changes in the fair value of financial
instruments;
-- interest credit on release of provision on settlement of EU
dividends tax claim;
-- gains or losses on retranslation of short-term inter-company
loan balances; and
-- related tax effects on the above and other tax items which do
not form part of the underlying tax rate (see Note 4).
In November 2018, the Group announced the implementation of a
Group-wide profit improvement programme. The total costs of
implementation of this programme are considered to be significant
in both nature and amount. On this basis the costs of the
implementation of this programme are excluded from adjusted
operating profit. Adjusted operating profit (including on a LFL
basis) is therefore presented before the impact of the Group profit
improvement programme costs.
The ongoing benefits arising from this programme are considered
to be part of underlying trading.
LFL measures
The Board reviews and compares current and prior year segmental
sales and adjusted operating profit at constant exchange rates and
excludes the impact of acquisitions and disposals during the
period.
The constant exchange rate comparison uses the current period
segmental information, stated in each entity's functional currency,
and translates the results into its presentation currency using the
prior period's monthly exchange rates, irrespective of the
underlying transactional currency.
The incremental impact of business acquisitions is excluded for
the first twelve months of ownership from the month of purchase.
For business disposals, comparative figures for segmental sales and
adjusted operating profit are adjusted to reflect the comparable
periods of ownership.
Appendix - Alternative performance measures (continued)
On 2 February 2021, Industrial Solutions' Millbrook business was
disposed of and, as a result, the segmental LFL adjusted sales and
adjusted operating profit for Industrial Solutions for half year
2021 exclude the trading results of the Millbrook business.
On 1 March 2021, Industrial Solutions' Brüel & Kjær Vibro
business was disposed of and, as a result, the segmental LFL
adjusted sales and adjusted operating profit for Industrial
Solutions for half year 2021 exclude the trading results of the
Brüel & Kjær Vibro business.
On 3 May 2021, Industrial Solutions' ESG business was disposed
of and, as a result, the segmental LFL adjusted sales and adjusted
operating profit for Industrial Solutions for half year 2021
exclude the trading results of the ESG business.
On 1 November 2021, Industrial Solutions' NDC business was
disposed of and, as a result, the segmental LFL adjusted sales and
adjusted operating profit for Industrial Solutions for half year
2021 exclude the trading results of the NDC business.
The Omega business has been classified as a discontinued
operation under IFRS 5, following the announcement and completion
of its disposal during 2022. As a result, the financial data for
half year 2022 excludes the trading results of the Omega business,
the six months ended 30 June 2021 and twelve months ended 31
December 2021 have been represented to show continuing operations
where required to by IFRS 5, including a reclassification of
continuing head office expenses that had previously been allocated
to the Omega reportable segment to the three continuing reportable
segments. Further details of discontinued operations are provided
in note 8 to the Interim Condensed Consolidated Financial
Statements.
The LFL measure is presented as a means of eliminating the
effects of exchange rate fluctuations on the period-on-period
statutory results as well as allowing the Board to assess the
underlying trading performance of the businesses on a LFL basis for
both sales and operating profit.
Based on the above policy, the adjusted performance measures are
derived from the statutory figures as follows:
Income statement measures
a) LFL adjusted sales by segment
2022 Half year LFL adjusted sales versus 2021 Half year LFL
adjusted sales
2022
Malvern Industrial Half year
Panalytical HBK Solutions Total
2022 Half year sales
by segment GBPm GBPm GBPm GBPm
------------------------- ------------ ------ ---------- ----------
Sales 209.1 215.0 146.1 570.2
Constant exchange rate
adjustment to 2021 half
year exchange rates (3.6) (1.7) (5.4) (10.7)
Acquisitions (1.3) (12.5) (1.4) (15.2)
LFL adjusted sales 204.2 200.8 139.3 544.3
-------------------------- ------------ ------ ---------- ----------
2021
Malvern Industrial Half year
Panalytical HBK Solutions Total
2021 Half year sales
by segment GBPm GBPm GBPm GBPm
------------------------- ------------ ------ ---------- ----------
Sales 178.5 188.0 171.0 537.5
Disposal of businesses - - (45.7) (45.7)
-------------------------- ------------ ------ ---------- ----------
LFL adjusted sales 178.5 188.0 125.3 491.8
-------------------------- ------------ ------ ---------- ----------
Appendix - Alternative performance measures (continued)
b) Adjusted operating profit and operating margin
2022
Malvern Industrial Half year
Panalytical HBK Solutions Total
------------------------------------
2022 Half year adjusted
operating profit GBPm GBPm GBPm GBPm
------------------------------------ ------------ ----- ---------- ----------
Statutory operating profit 17.7 16.1 20.5 54.3
Net transaction-related
costs and fair value adjustments 3.9 2.0 0.9 6.8
Depreciation of acquisition-related
fair value adjustments
to property, plant and
equipment 0.1 - - 0.1
Configuration and customisation
costs carried out by third
parties on material SaaS
projects 1.1 1.2 - 2.3
Amortisation of acquisition-related
intangible assets 3.5 4.9 0.4 8.8
------------------------------------- ------------ ----- ---------- ----------
Adjusted operating profit 26.3 24.2 21.8 72.3
Constant exchange rate
adjustment to 2021 half
year exchange rates (0.7) (1.6) (1.5) (3.8)
Acquisitions 2.0 (2.7) (0.2) (0.9)
------------------------------------- ------------ ----- ---------- ----------
LFL adjusted operating
profit 27.6 19.9 20.1 67.6
------------------------------------- ------------ ----- ---------- ----------
2021
Malvern Industrial Half year
Panalytical HBK Solutions Total
------------------------------------
2021 Half year adjusted
operating profit GBPm GBPm GBPm GBPm
------------------------------------ ------------ ---- ---------- ----------
Statutory operating profit 17.6 14.9 22.9 55.4
Restructuring costs 1.1 2.9 (0.2) 3.8
Net transaction-related
costs and fair value adjustments 1.0 1.3 1.1 3.4
Depreciation of acquisition-related
fair value adjustments
to property, plant and
equipment 0.1 - - 0.1
Amortisation of acquisition-related
intangible assets 2.5 2.6 0.3 5.4
------------------------------------- ------------ ---- ---------- ----------
Adjusted operating profit 22.3 21.7 24.1 68.1
Disposal of businesses - - (4.1) (4.1)
------------------------------------- ------------ ---- ---------- ----------
LFL adjusted operating
profit 22.3 21.7 20.0 64.0
------------------------------------- ------------ ---- ---------- ----------
2021
Malvern Industrial Full year
Panalytical HBK Solutions Total
------------------------------------
2021 Full year adjusted
operating profit GBPm GBPm GBPm GBPm
------------------------------------ ------------ ---- ---------- ----------
Statutory operating profit 55.3 38.6 46.0 139.9
Restructuring costs 2.3 4.6 3.3 10.2
Net transaction-related
costs and fair value adjustments 6.5 7.8 4.7 19.0
Depreciation of acquisition-related
fair value adjustments
to property, plant and
equipment 0.2 - - 0.2
Configuration and customisation
costs carried out by third
parties on material SaaS
projects 1.2 4.6 1.2 7.0
Amortisation of acquisition-related
intangible assets 5.1 7.7 0.5 13.3
------------------------------------- ------------ ---- ---------- ----------
Adjusted operating profit 70.6 63.3 55.7 189.6
------------------------------------- ------------ ---- ---------- ----------
Appendix - Alternative performance measures (continued)
2022
Malvern Industrial Half year
Panalytical HBK Solutions Total
--------------------------- ------------ ---- ---------- ----------
2022 Half year operating
margin % % % %
--------------------------- ------------ ---- ---------- ----------
Statutory operating margin
(1) 8.5 7.5 14.0 9.5
---------------------------- ------------ ---- ---------- ----------
Adjusted operating margin
(2) 12.6 11.3 14.9 12.7
---------------------------- ------------ ---- ---------- ----------
LFL adjusted operating
margin (3) 13.5 9.9 14.4 12.4
---------------------------- ------------ ---- ---------- ----------
2021
Malvern Industrial Half year
Panalytical HBK Solutions Total
--------------------------- ------------ ---- ---------- ----------
2021 Half year operating
margin % % % %
--------------------------- ------------ ---- ---------- ----------
Statutory operating margin
(1) 9.9 7.9 13.3 10.3
---------------------------- ------------ ---- ---------- ----------
Adjusted operating margin
(2) 12.5 11.5 14.1 12.7
---------------------------- ------------ ---- ---------- ----------
LFL adjusted operating
margin (3) 12.5 11.5 16.0 13.0
---------------------------- ------------ ---- ---------- ----------
2021
Malvern Industrial Full year
Panalytical HBK Solutions Total
--------------------------- ------------ ---- ---------- ----------
2021 Full year operating
margin % % % %
--------------------------- ------------ ---- ---------- ----------
Statutory operating margin
(1) 13.8 9.1 13.7 12.0
---------------------------- ------------ ---- ---------- ----------
Adjusted operating margin
(2) 17.6 14.9 16.6 16.3
---------------------------- ------------ ---- ---------- ----------
1. Statutory operating margin is calculated as statutory
operating profit divided by sales
2. Adjusted operating margin is calculated as adjusted operating profit divided by sales
3. LFL adjusted operating margin is calculated as LFL adjusted
operating profit divided by LFL adjusted sales. Refer to the tables
above for a reconciliation of the nearest GAAP measure
(sales/operating profit respectively) to LFL adjusted sales/LFL
adjusted operating profit.
c) Adjusted net finance costs
2022 2021 2021
Half year Half year Full year
GBPm GBPm GBPm
------------------------------------ ---------- ---------- ----------
Statutory net finance (cost)/credit (12.8) 8.8 7.4
Net loss/(gain) on retranslation
of short-term
inter-company loan balances 10.7 (6.7) (7.2)
Interest credit on release of
provision on settlement of EU
dividends tax claim - (5.1) (5.1)
Adjusted net finance costs (2.1) (3.0) (4.9)
-------------------------------------- ---------- ---------- ----------
d) Adjusted profit before taxation
2022 2021 2021
Half year Half year Full year
GBPm GBPm GBPm
-------------------------------- ---------- ---------- ----------
Adjusted operating profit 72.3 68.1 189.6
Share of results of associates 0.1 - -
Adjusted net finance costs (2.1) (3.0) (4.9)
---------------------------------- ---------- ---------- ----------
Adjusted profit before taxation 70.3 65.1 184.7
---------------------------------- ---------- ---------- ----------
Appendix - Alternative performance measures (continued)
e) Adjusted earnings per share
2022
Half 2021 2021
year Half year Full year
Adjusted earnings GBPm GBPm GBPm
------------------------------------------------ ----- ---------- ----------
Statutory profit after tax from continuing
operations 29.2 176.4 335.6
Adjusted for:
Restructuring costs - 3.8 10.2
Net transaction-related costs and fair
value adjustments 6.8 3.4 19.0
Depreciation of acquisition-related fair
value adjustments to property, plant and
equipment 0.1 0.1 0.2
Configuration and customisation costs carried
out by third parties on material SaaS projects 2.3 - 7.0
Amortisation of acquisition-related intangible
assets 8.8 5.4 13.3
Profit on disposal of businesses (0.2) (117.7) (226.5)
Interest credit on release of provision
on settlement of EU dividends tax claim - (5.1) (5.1)
Net loss/(gain) on retranslation of short-term
inter-company loan balances 10.7 (6.7) (7.2)
Tax effect of the above and other non-recurring
items (2.9) (8.7) (1.6)
------------------------------------------------- ----- ---------- ----------
Adjusted earnings 54.8 50.9 144.9
------------------------------------------------- ----- ---------- ----------
2022
Adjusted earnings per share from continuing Half 2021 2021
operations year Half year Full year
---------------------------------------------- ----- ---------- ----------
Weighted average number of shares outstanding
(millions) 110.0 115.7 113.7
------------------------------------------------ ----- ---------- ----------
Adjusted earnings per share (pence) 49.8 44.0 127.4
------------------------------------------------ ----- ---------- ----------
Basic earnings per share in accordance with IAS 33 'Earnings Per
Share' are disclosed in Note 6.
Financial position measures
f) Net (debt)/cash
2022 2021 2021
Half year Half year Full year
GBPm GBPm GBPm
----------------------------------------------------------- ---------- ---------- ------------
Bank overdrafts (8.0) (0.2) -
Bank loans unsecured (220.2) -
----------------------------------------------------------- ---------- ---------- ------------
Total borrowings (228.2) (0.2) -
Cash and cash equivalents included in assets held for sale 7.7 - -
Cash and cash equivalents included in current assets 122.2 273.0 167.8
----------------------------------------------------------- ---------- ---------- ------------
Net (debt)/cash (98.3) 272.8 167.8
----------------------------------------------------------- ---------- ---------- ------------
2022 2021 2021
Half year Half year Full year
--------------------------------- --------- --------- ---------
GBPm GBPm GBPm
--------------------------------- --------- --------- ---------
Reconciliation of changes in
cash and cash equivalents to
movements in net (debt)/cash
Net (decrease)/increase in cash
and cash equivalents (43.6) 63.6 (36.8)
Proceeds from borrowings (326.1) - (70.0)
Repayment of borrowings 98.7 99.8 169.8
Effect of foreign exchange rate
changes 4.9 3.3 (1.3)
---------------------------------- --------- --------- ---------
Movement in net (debt)/cash (266.1) 166.7 61.7
Net (debt)/cash at beginning
of year 167.8 106.1 106.1
---------------------------------- --------- --------- ---------
Net (debt)/cash at end of period (98.3) 272.8 167.8
---------------------------------- --------- --------- ---------
Net (debt)/cash excludes lease liabilities arising under IFRS 16
as this aligns with the definition of net (debt)/cash under the
Group's bank covenants.
Appendix - Alternative performance measures (continued)
Cash flow measures
g) Adjusted cash flow
2022 2021 2021
Half year Half year Full year
GBPm GBPm GBPm
---------------------------------------------------------------------------------- ---------- ---------- ----------
Cash generated from operations (from continuing and discontinued operations) 43.4 96.7 191.6
Net income taxes paid (20.5) (17.2) (32.2)
Net cash inflow from operating activities 22.9 79.5 159.4
Transaction-related costs paid 6.0 9.0 26.6
Restructuring cash outflow 2.6 6.8 11.9
Net income taxes paid 20.5 17.2 32.2
Purchase of property, plant and equipment and intangible assets from continuing
and discontinued
operations) (32.3) (19.1) (35.3)
SaaS-related cash expenditure 2.3 - 5.9
Proceeds from disposal of property, plant and equipment and software 13.2 - -
Adjusted cash flow from discontinued operations (7.3) (13.5) (22.6)
---------------------------------------------------------------------------------- ---------- ---------- ----------
Adjusted cash flow from continuing operations 27.9 79.9 178.1
---------------------------------------------------------------------------------- ---------- ---------- ----------
Adjusted cash flow conversion1 39% 117% 94%
---------------------------------------------------------------------------------- ---------- ---------- ----------
1. Adjusted cash flow conversion is calculated as adjusted cash
flow as a proportion of adjusted operating profit.
Other measures
h) Return on gross capital employed ('ROGCE')
The return on gross capital employed is calculated as adjusted
operating profit for the last 12 months divided by the average of
opening and closing gross capital employed. Gross capital employed
is calculated as net assets excluding net debt/(cash) and excluding
accumulated amortisation and impairment of acquisition-related
intangible assets including goodwill.
(Restated)(1) (Restated)(1)
30 June 2022 30 June 2021 30 June 2020
GBPm GBPm GBPm
------------------------------------------------------------------------- ------------- ------------- -------------
Net debt/(cash) (see APM f) 98.3 (272.8) (94.3)
Accumulated impairment losses on goodwill including items transferred to
assets held for sale 167.0 156.7 247.3
Accumulated amortisation and impairment of acquisition-related intangible
assets including
items transferred to assets held for sale 253.1 362.7 415.3
Shareholders' equity 1,176.6 1,224.2 1,294.4
------------------------------------------------------------------------- ------------- ------------- -------------
Gross capital employed 1,695.0 1,470.8 1,862.7
------------------------------------------------------------------------- ------------- ------------- -------------
Average gross capital employed (current and prior period)(2) 1,582.9 1,666.8
------------------------------------------------------------------------- ------------- -------------
Adjusted operating profit from continuing and discontinued operations for
six months to June
2022 and 2021 86.3 76.8
Adjusted operating profit from continuing and discontinued operations for
six months to December
2021 and 2020 132.6 129.5
Total adjusted operating profit for last 12 months 218.9 206.3
------------------------------------------------------------------------- ------------- -------------
Return on gross capital employed 13.8% 12.4%
------------------------------------------------------------------------- ------------- -------------
1. Shareholders' equity and gross capital employed have been
restated for the GBP18.9 million impact of the Group's change in
accounting policy for Software as a Service ('SaaS') arrangements.
See note 1 for further details.
2. Average gross capital employed is calculated as current
period gross capital employed divided by comparative period gross
capital employed.
Appendix - Alternative performance measures (continued)
i) Net transaction-related costs and fair value adjustments
Net transaction-related costs and fair value adjustments
comprise transaction costs of GBP6.6 million
(Half year 2021: GBP3.5 million; Full year 2021: GBP18.8
million) that have been recognised in the continuing Condensed
Consolidated Income Statement under IFRS 3 (Revised) 'Business
Combinations' and other fair value adjustments relating to deferred
and contingent consideration comprising a charge of
GBP0.2 million (Half year 2021: credit of GBP0.1 million; Full
year 2021: charge of GBP0.2 million). Net
transaction-related costs and fair value adjustments are
included within administrative expenses. Transaction-related costs
have been excluded from the adjusted operating profit and
transaction costs paid of GBP6.0 million (Half year 2021: GBP9.0
million; Full year 2021: GBP26.6 million) have been excluded from
the adjusted cash flow.
Dividend timetable - H1 2022 interim dividend
Event Date - 2022
---------------- -----------
Ex-dividend date 6 October
Record date 7 October
Payment date 11 November
---------------- -----------
Cautionary statement
This press release may contain forward-looking statements. These
statements can be identified by the fact that they do not relate
only to historical or current facts. Without limitation,
forward-looking statements often use words such as anticipate,
target, expect, estimate, intend, plan, goal, believe, will, may,
should, would, could or other words of similar meaning. These
statements may (without limitation) relate to the Company's
financial position, business strategy, plans for future operations
or market trends. No assurance can be given that any particular
expectation will be met or proved accurate and shareholders are
cautioned not to place undue reliance on such statements because,
by their very nature, they may be affected by a number of known and
unknown risks, uncertainties and other important factors which
could cause actual results to differ materially from those
currently anticipated. Any forward-looking statement is made on the
basis of information available to Spectris plc as of the date of
the preparation of this press release. All forward-looking
statements contained in this press release are qualified by the
cautionary statements contained in this section. Other than in
accordance with its legal and regulatory obligations, Spectris plc
disclaims any obligation to update or revise any forward-looking
statement contained in this press release to reflect any change in
circumstances or its expectations.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR FLFFADVILVIF
(END) Dow Jones Newswires
August 01, 2022 02:00 ET (06:00 GMT)
Spectris (LSE:SXS)
Historical Stock Chart
From Feb 2024 to Mar 2024
Spectris (LSE:SXS)
Historical Stock Chart
From Mar 2023 to Mar 2024