Good vibrations at Spectris

Despite releasing a detailed trading update in January covering 2011, instrumentation and controls group Spectris still caught the market on the hop with better than expected profits before tax and a better than expected hike in the dividend.

Adjusted profit before tax rose 45% to £191.6m from £132.3m the year before. Statutory profit before tax rose 38% to £166.0m from £119.9m in 2010. Market expectations were for headline profit before tax of £185.5m.

Sales broke through the billion pounds barrier, rising 23% to £1,106.2m in 2011 from £901.9m in 2010. Acquisitions contributed 7% to sales and currency had a positive impact of 1%, so with these stripped out sales growth was 15%. The adjusted return on sales - i.e. the operating margin - improved to 18.2% from 15.8% in 2010.

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Adjusted earnings per share (EPS) were also ahead of market expectations at 124.1p, up from 86.6p the year before. Analysts following the stock had pencilled in an EPS figure of 120.12p.

With the cash conversion rate at 89% of operating profit the company felt flushed enough to bump up the full year dividend pay-out to 33.6p from 28.0p the year before, ahead of market expectations of an increase to 32.86p. The final dividend in respect of 2011 has been increased to 24.9p from 20.9p the year before.

The group said it achieved record sales and operating profits in all of its segments, helped by the contribution from companies bought in a £372.1m acquisition spree. Net debt at the end of the year stood at £356.2m, up from net debt of £270.0m at the end of 2010.

The deficit in the group's defined benefit pension schemes narrowed a tad to £13.1m at the end of 2011 from £14.1m at the beginning of the year after the company chipped in with £2.6m of deficit reduction contributions for the UK scheme.

Regionally, sales in Asia Pacific in the year grew by 17% on a like-for-like basis, with continued strength in China, where sales increased by 27%. North America grew by 14% and Europe was up by 13%. After-sales, service and consumables, which provide a less lumpy source of revenue for the group, represented 26% of total group sales.

The car making market, a key market for the group's Test and Measurement division, continued to recover last year, the group said, while sales to the aerospace market grew strongly. The group is also enjoying a boost from the popularity of smartphones, as manufacturers are increasingly adding in-line testing of components to end-of-line testing, as a result of which the company has adapted its acoustic and vibration testing offerings.

"Whilst the current macro-economic outlook remains uncertain, the board is confident that, as a result of continued investment in new products and applications, together with the growth opportunities and resilience which our recent acquisitions provide, Spectris is strategically well positioned for the year ahead," said Spectris's Chief Executive, John O'Higgins.

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