Spectris plc - 2023 full year
results
29 February 2024 - Spectris plc
(SXS: LSE), the expert in providing insight through precision
measurement, announces full year results for the year ended 31
December 2023.
Double-digit like-for-like (LFL) sales growth and record
profit
Andrew Heath, Chief Executive said:
"We made further, excellent progress in 2023, delivering
another year of double-digit sales growth, record profit and an
operating margin in excess of 18%. But we are far from done. The
combination of the improved quality of the Group, our strong
self-help story and the significant opportunities that lie ahead
gives me great confidence in our future prospects, with the
delivery of further margin expansion in 2024 providing another step
towards margins in excess of 20%."
Continuing operations
|
|
2023
|
2022
|
Change
|
LFL
change1
|
Adjusted1
|
|
|
|
|
|
Sales (£m)
|
|
1,449.2
|
1,327.4
|
9%
|
10%
|
Operating profit (£m)
|
|
262.5
|
222.4
|
18%
|
18%
|
Operating margin (%)
|
|
18.1%
|
16.8%
|
130bps
|
130bps
|
Profit before tax (£m)
|
|
263.6
|
219.7
|
20%
|
|
Earnings per share
(pence)
|
|
199.7p
|
159.9p
|
25%
|
|
Adjusted cash conversion
(%)
|
|
103%
|
74%
|
29pp
|
|
Return on gross capital employed
(%)
|
|
18.5%
|
16.0%
|
250bps
|
|
Statutory
|
|
|
|
|
|
Sales (£m)
|
|
1,449.2
|
1,327.4
|
9%
|
|
Operating profit (£m)
|
|
188.6
|
172.6
|
9%
|
|
Operating margin (%)
|
|
13.0%
|
13.0%
|
Flat
|
|
Profit before tax (£m)
|
|
185.6
|
151.5
|
23%
|
|
Cash generated from
operations
|
|
245.5
|
166.8
|
47%
|
|
Basic earnings per share
(pence)
|
|
140.3p
|
106.7p
|
31%
|
|
Dividend per share
(pence)
|
|
79.2p
|
75.4p
|
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 in the Consolidated Financial
Statements.
Strong financial performance driven by continued execution of
our Strategy
o LFL
sales up 10%, a third successive year of double-digit LFL sales
growth
o Strong
margin progression with adjusted operating margin up 130bps at
18.1% (2022: 16.8%)
o Record
adjusted operating profit, up 18% at £262.5 million (2022: £222.4
million)
o Statutory profit before tax up 23% at £185.6 million (2022:
£151.5 million)
o Adjusted earnings per share increased by 25% to 199.7p (2022:
159.9p)
o Return
on Gross Capital Employed (ROGCE) increased to 18.5% (2022:
16.0%)
o Strong
cash performance with adjusted cash conversion of 103% (2022:
74%)
Great businesses delivering strong growth and margin
expansion
o Scientific: sales up 7% (LFL: 12%); adjusted operating margin
up 70bps at 22.0% (2022: 21.3%)
o Dynamics: sales up 10% (LFL: 6%); adjusted operating margin
up 220bps at 17.2% (2022: 15.0%)
Investing for growth and attractive shareholder returns
supported by a strong balance sheet
o New
product launches in all businesses underpinned by investment in
R&D
o Completion of four acquisitions/investments in 2023 (total
consideration of £60 million)
o Divestment of Red Lion Controls will complete portfolio
rationalisation
o Completion of £300 million share buyback with additional £150
million programme underway
o Dividend per share increase of 5%; 34 years of continuous
dividend growth
o Strong
balance sheet with net cash of £138.8 million (2022: £228.0
million)
Outlook for 2024
The Group's resilience, leading
product portfolio and broad end market exposure, combined with a
strong self-help story, provides confidence in the Group's ability
to navigate an uncertain macroeconomic environment this
year.
We expect to deliver another year
of further progress in 2024, including margin expansion, after
taking into account the impact of the Red Lion disposal. Progress
is expected to be weighted towards the second half reflecting the
strong performance of the Group in the first half of 2023 and an
improving outlook in a number of key end
markets.
Contacts:
Spectris plc
Andrew Heath, Chief Executive
Officer
Derek Harding, Chief Financial
Officer
Mathew Wootton, Director of
Investor Relations
Teneo
Martin Robinson
Giles Kernick
+44 20 7353 4200
Analyst Presentation and webcast
An analyst presentation will be
held at 10am GMT today at Bank of America, 2 King Edward Street,
London EC1A 1HQ. This will be available as a live webcast via the
following link:
https://www.investis-live.com/spectris/65aa4d2dbacfa60c00ab5ebf/mnby
with a recording made available on the Spectris
website following the meeting.
The Q&A conference call can
also be accessed with the following dial-in details:
United Kingdom (Local): +44 20
3936 2999
United Kingdom (Toll-Free): +44
800 358 1035
Access Code: 236854
About Spectris
Spectris combines precision with
purpose, delivering progress for a more sustainable world. We
provide critical insights to our customers through premium
precision measurement solutions combined with technical expertise
and deep domain knowledge. Precision is at the heart of what we do
- our leading, high-tech instruments and software equip our
customers to solve some of their greatest challenges to make the
world cleaner, healthier and more productive. We are focused on two
key Divisions - Spectris Scientific and Spectris Dynamics, which
are placed in technology-driven end markets, with strong
fundamentals and attractive growth trajectories. We have leading
market positions in premium segments and employ 7,300 people
located in more than 30 countries, all united behind our Purpose to
deliver value beyond measure for all our stakeholders. For more
information, visit www.spectris.com.
Chief Executive Review - an excellent 2023, with exciting
opportunities ahead
Double-digit LFL sales growth with strong margin expansion
and record operating profit
2023 was an excellent year for
Spectris, reflecting the strength of the business and the strong
execution of our Strategy for Sustainable Growth. Our people have
continued to aim high, delivering a third successive year of
double-digit sales growth and record profitability. Our strong
performance is consistent with the ambitious, medium-term targets
we laid out in October 2022 and provides further evidence of how we
have improved the quality and resilience of our
business.
I would like to thank all my
colleagues across Spectris for their commitment to delivering
positive outcomes for our customers, working hard for each other
and driving great results for the Group. Thank you for living our
Values and inspiring a bold, high-performing culture that
continually goes beyond and embraces our Purpose to make the world
cleaner, healthier and more productive.
Despite the return of more normal
customer ordering patterns in 2023, following the easing of global
supply chains, our order book remains robust, providing good levels
of visibility as we entered 2024. Order cover of between 4 and 5
months is higher than where the Group has been historically
pre-pandemic, is in line with our expectations and consistent with
where we expect order cover to settle over the
medium-term.
We maintained strong sales
momentum, with LFL sales growth of 10% which was ahead of our end
markets, reflecting the introduction of exciting new products and
the excellent conversion of our record order book at the start of
the year. LFL sales exceeded the expected medium-term market growth
rates in each of our major end markets with the exception of life
sciences/pharmaceutical, where sales were 9% lower. This reflects
the earlier normalisation of demand in this market after strong
growth in 2022 and 2021.
Industry
|
Sales
2023
(£m)
|
Sales as
% of total Group
|
LFL sales
Growth
%
|
Expected medium-term market
growth %
|
Life sciences /
pharmaceutical
|
267
|
18%
|
-9%
|
5-7%
|
Technology-led
industrials
|
233
|
16%
|
8%
|
5-7%
|
Electronics and
semiconductor
|
175
|
12%
|
19%
|
6-8%
|
Automotive
|
149
|
10%
|
8%
|
4-6%
|
Materials
|
142
|
10%
|
16%
|
5-6%
|
Academic
research
|
142
|
10%
|
29%
|
5-6%
|
Other
|
341
|
24%
|
19%
|
3-5%
|
We also continue to deliver higher
quality, more profitable growth, with Spectris Dynamics producing a
particularly impressive performance, delivering on the targets they
set at the start of the year and carrying good momentum into 2024.
Our focus on operational excellence, positive net pricing and a
more benign input cost environment resulted in a 130bps increase in
adjusted operating margins. The improved productivity and
competitiveness is being driven through the Spectris Business
System (SBS), which once again delivered significant, incremental
benefits in 2023, materially contributing to the increase in
profitability.
The Group delivered a record
adjusted operating profit in 2023 - above our previous high in
2019, even after our divestment programme. Our adjusted operating
margin of 18.1% fulfils a pledge we made when I joined Spectris in
2018, to restore Spectris to its previous margin highs. It is
evidence of the progress made and the strength of our businesses,
that we now see this as a stepping stone, on our way to margins in
excess of 20%.
We are highly cash generative,
with cash conversion over 100% on an adjusted basis, enabling us to
maintain very strong balance sheet optionality and flexibility to
invest in growth.
During the year we invested £108
million in R&D to ensure the future pipeline remains strong. We
continue to have significant success in commercialising our
technology with a number of new products launched in the year with
additional exciting launches planned for 2024. We made four
acquisitions/investments to bolster our capabilities and continued
to develop further acquisition opportunities which we will work
hard to realise in 2024. And in accordance with our capital
allocation priorities, we completed the £300 million share buyback
programme announced in April 2022 and commenced the first tranche
of the £150 million share buyback programme announced in December
2023.
Towards the end of the year, we
announced the sale of Red Lion Controls which, when completed, will
mark the conclusion of the portfolio rationalisation envisaged in
2019. This programme has simplified and focused the Group through
the divestment of eight businesses, at attractive valuations,
generating £1.4 billion in gross proceeds, allowing us to reinvest
in our future, as well as underpinning returns to
shareholders.
The SBS represents a key building
block to meeting our medium-term adjusted operating margin target
of 20% plus. I have been impressed with the commitment to the SBS
and the tangible progress I have seen across our sites during my
visits throughout 2023. During the year, we commenced our 'Bronze,
Silver, Gold' certification programme to drive lean operations
across our core operational metrics, with seven of our sites
achieving Bronze certification by the end of the year.
And we have enhanced our
credentials as a leading sustainable business making strong
progress towards our Net Zero ambition with a 27% reduction in our
scope 1 and 2 emissions and achieving an 'A-' in our recent CDP
rating. I am also very pleased with the progress we are making to
ensure Spectris continues to be a great place to work with our
engagement scores increasing again in 2023, rising to 3.92 (out of
5.00), up from 3.86 in 2022 and 3.72 in 2021.
Our performance in 2023 provides
further evidence of the renewed strength of the business and
demonstrates the benefit of the breadth of our portfolio, with
exposure to both early-cycle and late-cycle end markets, with broad
geographic exposure. Our high-quality, focused business, along with
our strong self-help story,
provides confidence in our outlook
for 2024 and beyond.
Significant opportunities lie ahead for the
Group
Spectris today is a very different
business than it was five years ago. We have carefully and
systematically refocused the Group around premium precision
measurement businesses with attractive financial characteristics
and long-term sustainable growth prospects, where we are solving
some of our customers' toughest challenges.
We have already seen the impact on
our performance, delivering strong levels of organic growth and
increased operating margins. We have also significantly
strengthened our financial position, while increasing investment in
future growth through higher levels of R&D and targeted
M&A. And alongside this, we have steadily increased shareholder
returns through our progressive dividend and share buyback
programmes.
But we are far from done. We are
working to truly unlock the Group's full potential. With great
people united behind a clear Strategy and common Purpose, I have
never been more excited about the future for Spectris as I am
today.
Spectris today is a higher quality
business. The progress and investments we have made have created a
stronger platform and a business with a clear Purpose. I have often
said that we are a business blessed with opportunities, and we now
more focused in our pursuit of them than ever before.
In 2024 and beyond, we will build
on these strong foundations. We cannot remove the uncertainty from
some of our end markets, but there are a number of levers we
control to drive further progress in the years ahead. These
'self-help' opportunities include the implementation of a programme
to transform our business processes, via the rollout of a single,
cloud-based ERP solution, in addition to the SBS. The new system
will provide a number of benefits, improving the visibility we have
across the business, increasing our efficiency and making us more
agile. Once complete, the new system will contribute an additional
150bps of margin, an important building block towards our target of
at least 20%.
We are focused on creating
shareholder value through a balanced approach to capital
allocation. Our strong balance sheet provides the flexibility to
maintain high levels of investment in R&D. We have a strong
pipeline of new products and services that we will bring to market
over the coming years, improving the vitality of our portfolio and
helping us maintain our competitive advantage.
Compounding growth through
targeted acquisitions remains a top priority and we would like to
build on the 12 acquisitions and investments we have made since
2019. We have strengthened our teams within the business,
generating leads, evaluating opportunities and maintaining a
healthy pipeline of potential acquisitions, ranging from small
bolt-ons to larger acquisitions.
And, as we have demonstrated, we
will return excess cash to shareholders if opportunities to make
acquisitions do not crystallise in a reasonable time-period. When
completed, our latest £150 million share buyback programme will
increase the total amount of cash returned to shareholders through
buyback programmes to £650 million since 2019.
We will also continue to build on
the great progress we have made by reducing our impact on the
planet through our sustainability initiatives, to meet our Net Zero
goals by 2030 and 2040. And we are building a lasting legacy for
future generations through our work with the Spectris Foundation,
with a plan to contribute an additional £6 million between 2023 and
2030 to support access to quality education in Science, Technology,
Engineering and Mathematics for people across all
backgrounds.
Delivering on these initiatives
and opportunities is only made possible by the determination of our
people, working for each other, and with our customers, to help
solve some of their most critical challenges. I am proud of the
work we have done to create a healthy, high-performance culture, a
critical ingredient in our recent and future success. We will
continue to invest in our people to drive even higher levels of
engagement as we execute our Strategy.
Despite the near-term
macroeconomic environment, I am more confident than ever in the
future for Spectris, as a leading sustainable business, capable of
compounding growth through the cycle and continuing to expand
margins.
Strategy for Sustainable Growth
Our Strategy for Sustainable
Growth is delivering compound growth and increased profitability,
along with strong cash flow and returns on invested capital. This
is reflected in our medium-term performance targets for the Group
to deliver:
· Organic sales growth of 6-7% through
the cycle
· Adjusted operating margin of 20%+
· Cash
conversion of 80-90%
· Return on gross capital employed (ROGCE) in the
mid-teens %
· Net
Zero and increased employee engagement
The achievement of these performance
objectives will materially enhance the value of the Group and
deliver significant benefits to all of Spectris'
stakeholders.
The Group's Strategy and business
model is aligned to delivering this framework, through six key
elements each of which is covered in detail in our Annual Report
and the divisional reviews.
1. Great businesses
Asset-light businesses focused on
premium, precision measurement solutions and industry-leading
domain expertise, aligned with our Purpose.
2. Structural growth markets
Aligned
with attractive, sustainable, structural growth markets with high
barriers to entry.
3. Customer centricity
Solving our customers' challenges
with leading, differentiated solutions, equipping them to make the
world cleaner, healthier and more productive.
4. Investing in growth
Disciplined capital allocation for
the benefit of all stakeholders - investment in growth through
R&D and M&A.
5. Operational excellence
Leveraging the SBS business
improvement projects and our high-performance culture.
6. People and Culture
Purpose-led, healthy,
high-performance culture with a clear ambition to create a positive
and lasting impact on the planet and society.
Summary and outlook
The Group's resilience, leading
product portfolio and broad end market exposure, combined with a
strong self-help story, gives me confidence in the Group's ability
to navigate an uncertain macroeconomic environment this
year.
We expect to deliver another year
of further progress in 2024, including margin expansion, after
taking into account the impact of the Red Lion disposal. Progress
is expected to be weighted towards the second half reflecting the
strong performance of the Group in the first half of 2023 and an
improving outlook in a number of key end
markets.
Andrew Heath
Chief Executive
Financial review
Financial performance
|
|
2023
|
2022
|
Continuing operations
|
|
£m
|
£m
|
Sales
|
|
1,449.2
|
1,327.4
|
Cost of sales
|
|
(611.1)
|
(576.6)
|
Gross profit
|
|
838.1
|
750.8
|
|
|
|
|
Indirect production and
engineering expenses
|
|
(126.9)
|
(114.1)
|
Sales and marketing
expenses
|
|
(249.6)
|
(233.0)
|
Administrative expenses
|
|
(273.0)
|
(231.1)
|
Operating profit
|
|
188.6
|
172.6
|
Sales increased by 9% or £121.8
million to £1,449.2 million (2022: £1,327.4 million) on a
continuing basis. Gross profit increased by £87.3 million driven by
a combination of pricing, increased volumes, a more benign input
cost environment and cost efficiencies derived from the
SBS.
Selling, General &
Administration (SG&A) expenses increased by £71.3 million,
resulting from higher staff costs including salaries, an increase
in travel costs reflecting a return to more normal levels of
customer interaction, and foreign exchange impacts from translation
and revaluation.
Included within SG&A are
configuration and customisation costs carried out
by third parties on material software-as-a-Service (SaaS) project
costs of £40.0 million (2022: £21.7 million), to support the
implementation of a new SAP cloud-based ERP system. This is a
significant multi-year programme that will continue in 2024.
Investment in R&D increased by £4.3 million to £108.1 million
representing 7.5% of sales (2022: £103.8 million or 7.8% of
sales).
Headcount increased by 1.4% versus
the comparative period, with increases to support growth offset by
efficiencies from the SBS and structural changes, mainly within
Spectris Dynamics.
Statutory operating profit was
£188.6 million, an increase of £16.0 million (2022: £172.6
million).
Statutory operating margin of
13.0% was in line with 2022 (13.0%).
Statutory to adjusted operating profit
|
2023
|
2022
|
Continuing operations
|
£m
|
£m
|
Statutory operating profit
|
188.6
|
172.6
|
Net transaction-related costs and
fair value adjustments
|
14.0
|
8.3
|
Spectris Foundation
Contribution
|
1.0
|
-
|
Depreciation of
acquisition-related fair value adjustments to property, plant and
equipment
|
-
|
0.2
|
Configuration and customisation
costs carried out by third parties on material SaaS
projects
|
40.0
|
21.7
|
Amortisation of
acquisition-related intangible assets
|
18.9
|
19.6
|
Adjusted operating profit
|
262.5
|
222.4
|
Net transaction-related costs and
fair value adjustments were £14.0 million (2022: £8.3 million)
primarily relating to the acquisitions completed during both the
current and prior years.
In 2023, the Group made an
additional contribution of £1.0 million to the Spectris Foundation
(2022: £nil). Consistent with the prior year, material SaaS project
costs of £40.0 million (2022: £21.7 million)
are excluded from adjusted operating profit, as are amortisation of
acquisition-related intangible assets £18.9 million (2022: £19.6
million).
Our adjusted operating margin of
18.1% was 130bps higher than the comparative period (2022: 16.8%)
resulting in a record level of adjusted operating profit of £262.5
million (2022: £222.4 million) an increase of 18% (18% on a LFL
basis). As a result of this excellent performance, which is
testament to the hard work of our colleagues, we are well on our
way to meeting our medium-term target to deliver margins in excess
of 20%.
Statutory operating profit to profit before
tax
Statutory profit before tax for
the period of £185.6 million (2022: £151.5 million) is calculated
after net finance income of £6.9 million (2022: £17.3 million cost)
and £12.6 million loss on disposal of businesses, predominantly
related to the divestment of Concept Life Sciences (CLS) (2022:
£0.3 million profit).
|
2023
|
2022
|
Continuing operations
|
£m
|
£m
|
Statutory operating profit
|
188.6
|
172.6
|
Fair value through profit and loss
movements on debt instruments
|
2.8
|
(4.1)
|
Share of post-tax results of
associates
|
(0.1)
|
-
|
(Loss)/profit on disposal of
businesses
|
(12.6)
|
0.3
|
Finance income
|
11.0
|
1.9
|
Finance costs
|
(4.1)
|
(19.2)
|
Statutory profit before tax
|
185.6
|
151.5
|
The £24.2 million improvement in
net finance income was mainly due to retranslation of short-term
intercompany loan balances that moved from a £14.6 million loss in
2022 to a £5.7 million gain in 2023. This reflects the
strengthening of Sterling against both the Euro and US Dollar over
the last 12 months, compared with 2022 where Sterling weakened
markedly against both currencies.
Bank interest receivable was £3.8
million higher, due to a higher average cash balance and the
significant increase in Sterling interest rates during the year.
There have been no drawings against our loan facilities during the
year, with interest payable solely relating to the commitment fee
on the Revolving Credit Facility (RCF) and the amortisation of
capitalised loan fees relating to this facility.
On 31 March 2023, the Group
disposed of the remaining part of CLS, which formed part of the
Spectris Scientific Division. The consideration received of £15.5
million was settled in cash, resulting in a loss on disposal of
£10.3 million. Further details are provided in note 8.
Also included in the £12.6 million loss on
disposal of businesses is £2.3 million of transaction costs
relating to prior year disposals.
Tax
The effective tax rate on adjusted
profit before tax for 2023 was 21.5% (2022: 21.7%). The effective
tax rate on statutory profit before tax was 21.7% (2022:
24.2%).
Earnings per share
Adjusted earnings per share grew
by 25% to 199.7 pence (2022: 159.9 pence). Statutory earnings
per share of 140.3 pence were 31% ahead of the prior year (2022:
106.7 pence).
LFL movements
After very strong order intake
growth of 9% on a LFL basis in 2022, the easing of global supply
chains has led to the return of more normal customer ordering
patterns in 2023 with order intake 5% lower on a LFL basis for the
full year. On a LFL basis, orders in North America and Europe were
down 0.5% and 3% respectively, with Asia 10% lower largely driven
by China where demand has been slower to recover.
LFL sales increased by £132.4
million (10%), reflecting the excellent conversion of our record
order book at the start of the year and the easing of global supply
chains. Acquisitions, net of disposals, increased sales by £5.4
million (0%) and foreign exchange movements decreased sales by
£16.0 million (1%). The relative contribution of the drivers of
sales growth reversed in 2023 as expected, with LFL sales growth of
10% comprising 8% price and 2% volume.
Strong sales growth, alongside
positive net pricing and a more benign input cost environment as
supply chains improved resulted in a 120bps increase in adjusted
gross margins. Within this, Spectris Dynamics delivered a
particularly impressive performance, delivering on the target they
set at the start of the year. LFL adjusted gross margins increased
by 90bps to 57.6%.
Cash flow
Adjusted cash flow from continuing
operations increased by £107.3 million to £271.1 million compared
to 2022, resulting in an adjusted cash conversion rate from
continuing operations of 103% (2022: 74%).
|
2023
|
2022
|
Adjusted cash flow from continuing
operations
|
£m
|
£m
|
Adjusted operating
profit
|
262.5
|
222.4
|
Adjusted depreciation and software
amortisation1
|
38.8
|
39.6
|
Working capital and other non-cash
movements
|
(5.5)
|
(54.1)
|
Capital expenditure
|
(24.7)
|
(44.1)
|
Adjusted cash flow from continuing
operations
|
271.1
|
163.8
|
Adjusted cash flow conversion from continuing
operations
|
103%
|
74%
|
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.
The Group generated a substantial
increase in adjusted cash flow from continuing operations driven by
the increase in adjusted operating profit, a significantly lower
net outflow in working capital and lower levels of capital
expenditure.
Capital expenditure of £24.7
million (2022: £44.1 million) equated to 1.7% of sales, compared to
3.3% in 2022. The lower level of expenditure in 2023 reflects the
phasing of spend relating to the new PMS facility in Colorado that
is planned to complete in 2024. Capital expenditure was 64% of
adjusted depreciation and software amortisation (2022:
111%).
|
2023
|
2022
|
Other cash flows and foreign exchange
|
£m
|
£m
|
Tax paid
|
(50.3)
|
(46.8)
|
Net interest received on cash and
borrowings
|
4.4
|
0.5
|
Dividends paid
|
(79.7)
|
(78.6)
|
Share buyback
|
(114.9)
|
(191.0)
|
Acquisition of businesses, net of
cash acquired
|
(49.5)
|
(114.7)
|
Acquisition of investment in
associates
|
(7.8)
|
(2.9)
|
Transaction-related costs
paid
|
(5.8)
|
(6.5)
|
Proceeds from disposal of
businesses, net of tax paid of £5.9 million (2022: £27.9
million)
|
3.3
|
365.4
|
SaaS-related cash
expenditure
|
(40.0)
|
(21.7)
|
Lease payments and associated
interest
|
(15.6)
|
(16.4)
|
Restructuring costs
paid
|
(1.4)
|
(7.6)
|
Net proceeds from exercise of
share options
|
0.6
|
0.2
|
Total other cash flows
|
(356.7)
|
(120.1)
|
Adjusted cash flow from continuing
operations
|
271.1
|
163.8
|
Adjusted cash flow from
discontinued operations
|
-
|
7.3
|
Foreign exchange
|
(3.6)
|
9.2
|
(Decrease)/increase in net
cash
|
(89.2)
|
60.2
|
During the year ended 31 December
2023, 3,382,896 ordinary shares were repurchased and cancelled by
the Group, representing the final tranches of the £300 million
share buyback programme announced on 19 April 2022 and part of the
first tranche of the £150 million share buyback announced on 11
December 2023. This resulted in a cash outflow of £114.9 million,
including transaction fees of £1.2 million.
During the year ended 31 December
2022, 6,439,493 ordinary shares were repurchased and cancelled by
the Group as part of the £300 million share buyback programme
announced on 19 April 2022, resulting in a cash outflow of £191.0
million, including transaction fees of £1.2 million.
Financing and treasury
The Group finances its operations
from retained earnings and, where appropriate, from third-party
borrowings. Total borrowings as at 31 December 2023 were £nil
(2022: £0.1 million).
At 31 December 2023, the Group had
a cash and cash equivalents balance of £138.8 million of which £0.3
million related to assets held for sale. The Group also had various
uncommitted facilities and bank overdraft facilities available but
undrawn. Gross debt was £nil, resulting in a net cash position of
£138.8 million, compared to a net cash position of £228.0 million
at 31 December 2022, representing an £89.2 million year-on-year
decrease in net cash.
As at 31 December 2023, the Group
had £393.1 million of committed facilities, consisting entirely of
a $500 million multi-currency RCF maturing in July 2025. The RCF
was undrawn at 31 December 2023 (2022:
undrawn).
For the 12 months ended 31
December 2023, there was net finance income for covenant purposes
of £3.9 million, resulting in the interest cover ratio being n/a
(31 December 2022: n/a). The minimum covenant interest cover
requirement is 3.75 times (covenant defined earnings before
interest, tax and amortisation divided by net finance charges).
Leverage (covenant defined earnings before interest, tax,
depreciation, and amortisation divided by net cash) was less than
zero (31 December 2022: less than zero) due to the Group's net cash
position, against a maximum permitted leverage of 3.5
times.
The Group has prepared and
reviewed cash flow forecasts for the period to 31 December 2028,
which reflect forecasted changes in revenue across its business and
performed a reverse stress test of the forecasts to determine the
extent of downturn which would result in insufficient liquidity or
a breach of banking covenants. Revenue would have to reduce by 38%
over the period under review for the Group to run out of liquidity
headroom. The reverse stress test does not take into account
further mitigating actions which the Group would implement in the
event of a severe and extended revenue decline, such as cancelling
the dividend or reducing capital expenditure. 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 a period of not less than 12
months from the date of this report. Accordingly, it continues to
adopt the going concern basis in relation to this conclusion and
preparing the 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 cash flows where there is reasonable
certainty of an exposure. At 31 December 2023, approximately 65% of
the estimated transactional exposures of £269.4 million for the
next 18 months were hedged using forward exchange contracts, mainly
against the Euro, US Dollar, Chinese Yuan Renminbi and Japanese
Yen.
The largest translational
exposures during the year 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.
|
2023
|
2022
|
|
2023
|
2022
|
|
|
(average)
|
(average)
|
Change
|
(closing)
|
(closing)
|
Change
|
US Dollar (USD)
|
1.24
|
1.24
|
0%
|
1.27
|
1.21
|
5%
|
Euro (EUR)
|
1.15
|
1.17
|
(2%)
|
1.15
|
1.13
|
2%
|
Chinese Yuan Renminbi
(CNY)
|
8.81
|
8.30
|
6%
|
9.03
|
8.31
|
9%
|
During the year, currency
translation effects resulted in adjusted operating profit being
£1.9 million lower (2022: £12.5 million higher) than it would have
been if calculated using prior year exchange
rates.
Transactional foreign exchange
losses of £5.8 million (2022: £nil) were included in administrative
expenses, whilst sales include a gain of £4.5 million (2022: £4.3
million loss) arising on forward exchange contracts taken out to
hedge transactional exposures in respect of sales.
Other non-reportable operating segment
The financial and operating
performance of the Spectris Scientific and Spectris Dynamics
reportable segments are provided in accordance with IFRS 8. The Red
Lion Controls and Servomex businesses are reported within the Other
non-reportable operating segment.
On a statutory basis, sales for
the Other non-reportable operating segment of £202.2 million
increased by 14% compared to 2022 (2022: £177.4 million) with LFL
sales also up 14%. Adjusted operating profit for the segment
was £38.4 million (2022: £27.2 million), an increase of 41% (40%
LFL), with an adjusted operating margin of 19.0%, an increase of
370bps on 2022 (350bps LFL). Statutory operating profit rose
27% to £33.2 million (2022: £26.2 million), primarily due to
improved gross margins from pricing and volume drop through, with
the statutory operating margin improving 160bps to
16.4%.
Red Lion Controls had a very
strong year, continuing the trends we saw in the first half, with
both sales and profitability benefiting from a combination of
volume growth and revised pricing. Volume growth was driven by
easing supply chains and increased capacity due to operational
improvements leveraging the SBS, with the latter also contributing
to strong margin improvement.
On 11 December 2023, the Group
announced that agreement had been reached for the sale of the Red
Lion Controls business. As a result, the Red Lion Controls business
has been classified as a disposal group held for sale and presented
separately in the Consolidated Statement of Financial Position. The
required regulatory approvals were received in January and February
2024 and the completion of the sale is expected to take place
during the second quarter of 2024.
In 2023, Red Lion had sales of
£101.8 million and adjusted operating profit of £21.9
million.
Servomex also delivered a very good
performance with sales growth driven by higher demand and a strong
operational performance. Higher contribution margins due to price
increases and easing material cost inflation drove a strong
increase in profitability.
Financial Summary
|
Spectris
Scientific
|
Spectris
Dynamics
|
Other
|
Group
Costs
|
Total
|
|
2023
|
2022
|
2023
|
2022
|
2023
|
2022
|
2023
|
2022
|
2023
|
2022
|
Sales (£m)
|
704.2
|
657.8
|
542.8
|
492.2
|
202.2
|
177.4
|
|
|
1,449.2
|
1,327.4
|
LFL sales growth (%)
|
12%
|
|
6%
|
|
14%
|
|
|
|
10%
|
|
Statutory operating profit
(£m)
|
124.4
|
118.3
|
56.2
|
46.5
|
33.2
|
26.2
|
(25.2)
|
(18.4)
|
188.6
|
172.6
|
Statutory operating margin
(%)
|
17.7%
|
18.0%
|
10.4%
|
9.4%
|
16.4%
|
14.8%
|
|
|
13.0%
|
13.0%
|
Adjusted operating profit
(£m)
|
155.2
|
140.0
|
93.1
|
73.6
|
38.4
|
27.2
|
(24.2)
|
(18.4)
|
262.5
|
222.4
|
LFL adjusted operating profit
change (%)
|
13%
|
|
24%
|
|
40%
|
|
|
|
18%
|
|
Adjusted operating margin
(%)
|
22.0%
|
21.3%
|
17.2%
|
15.0%
|
19.0%
|
15.3%
|
|
|
18.1%
|
16.8%
|
LFL adjusted operating margin
change (bps)
|
10bps
|
|
240bps
|
|
350bps
|
|
|
|
130bps
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales % of Group sales
|
49%
|
50%
|
37%
|
37%
|
14%
|
13%
|
|
|
100%
|
100%
|
Spectris Scientific
|
|
2023
|
2022
|
Change
|
LFL
change
|
Statutory sales (£m)
|
|
704.2
|
657.8
|
7%
|
12%
|
Adjusted operating
profit1 (£m)
|
|
155.2
|
140.0
|
11%
|
13%
|
Adjusted operating
margin1 (%)
|
|
22.0%
|
21.3%
|
70bps
|
10bps
|
Statutory operating profit
(£m)
|
|
124.4
|
118.3
|
5%
|
|
Statutory operating margin
(%)
|
|
17.7%
|
18.0%
|
(30bps)
|
|
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 Consolidated Financial Statements.
Continued strong growth and sustainable margin
performance
Spectris Scientific delivered a
strong financial performance in 2023, with sales growth of 7% to
£704.2 million (2022: £657.8 million) and a double-digit increase
in adjusted operating profit. LFL sales growth was 12% after taking
into account the £17 million (+3%) net impact of acquisitions and
disposals (primarily the disposal of the remaining element of CLS)
and adverse foreign exchange movements of £13 million
(+2%).
We saw strong sales growth across
all key end markets, with the exception of life sciences, which was
impacted by the earlier normalisation in customer demand after
strong growth in prior periods. Sales grew across all regions with
growth strongest in Asia, including China.
Orders were 6% lower (3% lower on
a LFL basis) than the prior year, with good demand growth in
materials and academia, offset by both life sciences and
semiconductor. Regionally, order growth in the US and flat demand
in Europe was offset by lower orders in Asia.
Adjusted operating profit
increased by 11% (13% LFL) to £155.2 million (2022: £140.0 million)
reflecting the strong sales growth and good operational
performance, with adjusted operating margin improving by 70bps to
22.0% (2022: 21.3%). On a LFL basis, the increase in adjusted
operating margin was 10bps, with higher sales volumes largely
offset by cost inflation.
Statutory operating profit was 5%
higher at £124.4 million (2022: £118.3 million) after including
£10.7 million of additional costs related to the investment in our
new ERP system, as part of the business transformation project.
Statutory operating margin was 17.7% (2022: 18.0%).
Strongly positioned in high-growth end markets supported by
sustainability trends
We are well positioned in
high-value, critical-to-quality areas where precision measurement,
domain expertise and analytics are valued by our customers
throughout the workflow. We are market leaders reflecting our broad
solution portfolio, strong domain knowledge for material analysis
and characterisation, as well as our deep customer relationships.
We are a key facilitator of customer innovation, supporting
opportunities across the material life cycle from extraction,
through functional performance, sustainability, and
recycling.
Spectris Scientific is focused on
the high-growth end markets of life sciences, material sciences
(primary and advanced materials), semiconductors and academia, that
are benefiting from a number of structural growth
trends:
1. Life sciences -
ageing populations, population growth, personalised medicines and
reshoring.
2. Primary materials -
minerals for the energy transition, lower carbon building materials
and increased recycling.
3. Advanced materials
- batteries and power electronics for the energy transition, supply
chain security and advanced manufacturing technologies.
4. Semiconductors -
electrification of mobility, reshoring of manufacturing including
US and EU Chips Act, increase use of personal devices.
Life Sciences
LFL sales during the period were
somewhat lower than the prior year, reflecting the earlier
normalisation of customer ordering patterns through the year after
an exceptionally strong performance in 2021 and 2022.
In particle characterisation, we
saw good sales growth in laser diffraction driven by small molecule
research and development, particularly in the US and India. This
was more than offset by lower sales in nanometrics into Biologics,
after a very strong performance over the last two years.
Sales into aseptic pharmaceutical manufacturing
were broadly flat in our PMS business, with strong demand in Europe
offset by other regions. We have been encouraged by growth in our
advisory services driven by our strong offering and recent changes
in the regulatory environment.
After a period of demand
normalisation in 2023 where order intake was lower than the prior
year, we anticipate demand to remain broadly flat in the first half
of 2024, returning to growth in the second half.
The outlook over the medium-term
remains positive, with growth in life sciences underpinned by a
number of structural trends including ageing and expanding
populations, the onshoring of manufacturing and the need to develop
new medicines and treatments.
Material Sciences
Primary materials
LFL sales grew across all regions,
with particularly strong growth in Asia predominantly driven by
mining and minerals. We saw strong sales
of our x-ray systems into our petrochemical, polymer and building
material customers, driven by their need to become carbon neutral,
with our products providing solutions in areas like production
efficiency and recycling. Our XRF and
XRD systems, including our Zetium, Epsilon, Aeris, and Empyrean
product lines are used by customers to analyse materials for
elemental properties and structural characteristics.
We saw continued order momentum in
2023, growing the order book to record levels, providing a positive
outlook for 2024.
Advanced materials
We delivered very good LFL sales
growth in 2023 reflecting our strong order book as we entered the
year and robust demand, driven by a number of structural growth
trends.
We support our customers to meet
their challenges through a range of solutions, including our laser
diffraction products for researching and developing the next
generation of battery materials as well as quality control, and we
have also seen increased interest in our online process solutions,
both for batteries and hydrogen fuel cells. Similarly, we saw an
increase in our x-ray diffraction sales, especially in China,
partly driven by the government investment schemes supporting
universities and research laboratories in the first half of
2023.
Looking ahead, the outlook for
advanced materials remains positive with continued investment in
new energy sources such as hydrogen, the enhanced electrification
of mobility, growing applications for power electronics and the
onshoring of manufacturing, all of which underpin the development
of new technologies and customer R&D.
Semiconductor
Sales into semiconductor and
electronics customers grew strongly across all regions, reflecting
the strength of our order book at the start of the year and solid
underlying demand. Within semiconductor contamination
monitoring, we saw strong sales growth in our aerosol, liquid, and
gas particle counters to customers in support of the buildout of
new semiconductor fabrication plants.
We saw good sales growth in our
MRD XL products in the compound semiconductor market, especially
power electronics. The acquisition of the XRD product line assets
from Freiberg Instruments in the second half of 2023 further
enhances our capabilities and solutions in this
area.
While order intake was lower in
2023 against a strong comparator as demand normalised, our pipeline
remains robust. In 2024, we expect order
levels to pick up in the second half as the industry returns to a
more normal business cycle.
The multi-year outlook for
semiconductor remains positive, driven by fabrication plant
expansion and technology advancements driven by a number of sectors
such as automotive, artificial intelligence and compound
semiconductors. We are also encouraged by positive customer
feedback in relation to recent product launches including our
NanoAir 10 particle counter for use in ultra-clean
environments.
Academia
We are well positioned to take
advantage of the academic research that feeds into our end markets,
with a strong brand built on high-precision measurement and
scientific credibility.
In 2023, we delivered very strong
LFL orders and sales growth driven by North America and Asia. We
have benefited from strong demand from universities and research
organisations for our XRD systems, to support materials research and analysis for batteries, and our
MicroCal product range used in a number of
applications from research to the discovery and development of
small molecule drugs, biotherapeutics and vaccines.
Helping solve customer challenges
Spectris Scientific provides
critical insights and domain expertise to help our customers find
solutions to their most complex challenges. Our customer value
proposition extends far beyond supplying our leading
products.
In advanced materials, the
increased focus on energy transition and battery development is
creating a number of opportunities. With energy systems
fuelling every aspect of our modern life, from cell phones to
electric cars and even space travel, achieving energy that is
clean, renewable and reliable, requires the development of better
batteries and fuel cells. A collaboration in the US between the
University of Pittsburgh and Spectris is enabling researchers to do
just that. Using data and insights drawn
from our
Empyrean x-ray diffraction technology,
the team at Pittsburgh are working towards a series of ambitious
goals to improve the power, efficiency and cost-effectiveness of
batteries.
In primary materials, we secured a
major order from a leading building materials producer in Asia for
a measurement and analysis solution based on our leading XRF Zetium
and XRD Aeris technology comprising 30 separate systems. This order
reflects our proven technology and application expertise
demonstrated in previous projects with our systems providing better
measurement, speed and greater operational stability as well as a
better user experience than the competition.
In pharmaceuticals, we continued
to strengthen our partnership with QILU Pharmaceutical, a leading
manufacturer of finished formulations and active ingredients in
China, with a significant order for our
Mastersizer and Zetasizer products across multiple sites. As well
as being recognised for our leading particle characterisation
technology, this order reflects our strong applications expertise
and aftermarket support including superior service support and
product training.
Investing for growth: R&D is driving growth and market
share gains
To drive growth, we have increased
investment in R&D to both enhance the performance of existing
products and develop new platforms, along with software, services
and analytics being key areas of focus. In 2023, we introduced a
number of new products to the market.
The Nanosight Pro provides a
best-in-class, simple and rapid solution for nano and biomaterials
characterisation for use in life sciences and pharmaceutical
development. The combination of advanced engineering and a blend of
smart features ensures measurements are efficient, quick and
accessible. Powered by machine learning, our Xplorer software
enables automated measurements and provides the highest quality
size and concentration data while connection to SMART Manager
assures robustness and minimises downtime.
Our ParticleSeeker product, a
smart aerosol manifold used to monitor air quality in semiconductor
manufacturing used in conjunction with the NanoAir10 nanoparticle
counter, provides multiple sample locations ideal for applications
requiring broad contamination monitoring in the cleanest and most
confined spaces in a semiconductor manufacturing
facility.
And in the FORJTM
fusion instrument, we have developed the world's fastest, safest
and most accurate fusion instrument for sample preparation for
x-ray fluorescence supporting elemental analysis. Based on our
expertise in x-ray fluorescence, inductively coupled plasma
analysis, sample preparation, and the entire analytical chain, FORJ
is designed to meet the highest material quality standards for
elemental analysis.
M&A
During the year, we completed
three acquisitions/investments to augment our capabilities and
compound growth in the future.
We acquired the x-ray diffraction
product line from Freiberg Instruments for a total consideration of
up to £13.0 million. The acquisition of crystal orientation
metrology tools provides complementary solutions to our existing
semiconductor portfolio allowing us to further respond to the
industry requirement to improve yields and performance.
We took a minority investment
of £7.8 million in LumaCyte Incorporated, a bioanalytic
instrumentation company, providing further exposure and deeper
insights into the high-growth cell & gene therapy and vaccine
markets.
The acquisition of Particle
Measuring Technique Ireland Limited (EMS), a long-established
partner and exclusive distributor in the UK and Ireland of Particle
Measuring System's micro-contamination products for £6.4
million, further strengthens our regional services and aftermarket
offering.
Operational excellence
We continue to leverage the SBS to
improve productivity and drive operational excellence across the
Division. During the year we completed a number of projects
delivering tangible financial benefits as well as promoting
increased engagement across our sites.
In Malvern Panalytical, our 'Land
and Expand' upselling programme drove additional sales
of
£4 million to existing
customers. A project to extend the life of
a key component in our x-ray diffraction instruments delivered £0.3
million of benefits in the year and improved cleanroom capacity and
layout at our Almelo site in the Netherlands, delivered a 20%
increase in output and £0.5 million of benefits.
During the year we adopted the
'Bronze, Silver, Gold' certification programme to drive lean
operations as measured by a number of core metrics, with two of our
sites, Zhuhai, China and Malvern, UK achieving Bronze certification
in 2023.
We have made good progress in our
business process transformation programme. In 2024 we will
implement a series of more simple, common and scalable global
processes supported by the introduction of a new ERP solution. The
new solution will provide improved visibility and deliver a number
of significant benefits to be realised from 2025
onwards.
Summary
Spectris Scientific is an
excellent business. We provide critical materials insights
through our instruments, data science and technical expertise. We
are well positioned to outperform in high-growth end markets,
aligned to clear sustainability trends. In 2024, we will continue
to work closely with customers to innovate and solve their
challenges.
Spectris Dynamics
|
|
2023
|
2022
|
Change
|
LFL
change
|
Statutory sales (£m)
|
|
542.8
|
492.2
|
10%
|
6%
|
Adjusted operating
profit1 (£m)
|
|
93.1
|
73.6
|
26%
|
24%
|
Adjusted operating
margin1 (%)
|
|
17.2%
|
15.0%
|
220bps
|
240bps
|
Statutory operating profit
(£m)
|
|
56.2
|
46.5
|
21%
|
|
Statutory operating margin
(%)
|
|
10.4%
|
9.4%
|
100bps
|
|
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 Consolidated Financial Statements.
A
very strong financial performance underpinned by significant margin
expansion
Spectris Dynamics delivered a very
strong financial performance in 2023, delivering double-digit
growth in sales and operating profit, underpinned by particularly
strong margin expansion. These results reflect the successful
reorganisation of the Division at the start of the year into three
customer-aligned sectors of virtual test, physical test and
in-process, alongside a number of specific actions to improve gross
margins and overheads.
Sales increased by 10% to £542.8
million (2022: £492.2 million). After taking into account £21
million (4%) sales growth from the acquisition of Dytran and
MicroStrain and £1.9 million (0%) for foreign exchange movements,
LFL sales grew by 6%. Sales grew across all key end markets, with
particularly strong growth in Aerospace & Defence and Academia
and on a regional basis, our largest market, Europe.
Orders were 3% lower (6% lower on
LFL basis) than the comparative period with strong double-digit
order growth in aerospace & defence and academia more than
offset by the expected softening in order intake across machine
manufacturing and automotive. On a regional basis, good levels of
order growth in the US were more than offset by Europe and Asia
with these two regions having the largest exposure to softer end
markets.
Adjusted operating profit of £93.1
million was significantly ahead of the comparative period, up 26%,
(24% on a LFL basis), with a significant increase in adjusted
operating margin which ended the year 220bps higher (240bps higher
on a LFL basis) at 17.2% (2022: 15.0%). This increase reflects the
anticipated strong increase in gross margins resulting from our
focus on operational excellence alongside the successful execution
of a margin expansion plan comprising pricing, re-organisation,
product design cost outs, supply chain optimisation and
rationalisation of our product
portfolio.
Statutory operating profit
increased by 21% to £56.2 million (2022: £46.5 million) reflecting
growth in the underlying business, which was partially offset by
£7.6 million of additional costs related to the investment in our
new ERP system, as part of the business transformation project. As
a result, statutory operating margin increased 100bps to 10.4%
(2022: 9.4%).
Well positioned in attractive markets
We are a world leader in the
provision of advanced integrated physical and virtual testing and
measurement. The Division is focused on four premium product lines:
virtual test; software; data acquisition; and high-precision
sensors with high growth prospects, where we have leading market
positions. These products are complementary for customers and
combine to offer the broadest test and measurement solutions in the
market. We are well positioned in attractive growth markets
that are benefiting from a number of structural growth
trends:
· increased adoption of Virtual Test particularly in automotive
and defence to accelerate the innovation cycle;
· digitisation and the increased use of digital tools to design
and test, lowering the cost of new innovations, and to process
large amounts of more complex data;
· electrification and the transformation of mobility and
energy; and
· automation to enhance productivity in a more connected
world.
These four key growth trends are aligned with our
Purpose to empower the innovators for a cleaner, healthier and more
productive world and are supporting higher levels of growth within
our market segments.
Automotive
LFL sales were ahead of a tough
comparator, with a strong performance in Europe partially offset by
North America and Asia.
We saw very good sales growth for
our electric powertrain testing solutions in Physical Test
leveraging our high-speed data acquisition systems, sensors and
software. And in In-process, demand for our end-of-line testing
solution for electric drive systems continued on a positive trend
during the year. In Virtual Test, while sales were lower compared
with 2022, we made good progress selling our hardware-in-the-loop
solutions and secured a number of new orders for our
multi-attribute simulators including our COMPACT Full Spectrum
Simulator (COMPACT FSS) which was launched during the year. Our
virtual test offering also gained recognition through a Supplier of
the Year award from Pirelli and an innovation award for our DiM 300
simulator as the 2023 Development Tool of the Year
by Vehicle Dynamics
International.
As reported at the half year, we
have seen a softening in demand with LFL orders lower than the
prior year, as customers adjusted their order patterns, reflecting
a combination of easing supply chains as lead times have shortened
and a reduction in the speed of rollout of new EV programmes among
leading automotive manufacturers.
Over the medium-term, we continue
to expect growing demand for automotive R&D, driven by the
development and adoption of electric and software-defined vehicles
and the need to reduce development time. With our broad product
offering across Virtual Test, Physical Test and In-Process we are
extremely well placed to benefit from this growth.
Machine manufacturing
Sales to customers wanting to
monitor their production processes and deployed assets were
slightly ahead of 2022 on a LFL basis, with growth in North America
and Europe largely offset by Asia.
In our OEM sensor business, where
customers incorporate our custom sensor solutions into their end
products, we delivered 55 customer prototypes, setting a new record
in the process. These projects which provide strong foundations for
future sales growth were broad-based covering a range of sensing
capabilities and end uses including: force sensors for batteries
and brakes applications; strain sensors for fuel cells and electric
vehicles; torque sensors for robotics; and mechatronics.
We were also successful selling
our high-precision accelerometers into the semiconductor industry
to control machine vibration. During the year, we strengthened our
In-process offering combining structural health monitoring, optical
sensing and software to create a turnkey solution for
customers.
Against a strong comparator, order
intake in machine manufacturing for the full year was lower on a
LFL basis, particularly in Asia, which more than offset demand
growth in North America.
We believe that over the medium to
longer term, the move towards greater levels of automation driven
by the scarcity of labour and the need for greater efficiency, will
continue to drive demand from machine manufacturing customers and
in turn, our smart and OEM sensor offering. Sales to this sector
continue to be helped by our focus on selected high-value end
markets, where customers are focused on improving the productivity
of high-value assets. This has driven demand for our weighing
technologies, including for smart OEM-type solutions in medical and
healthcare applications, where accurate and reliable sensors are
critical.
Aerospace and defence
We saw strong LFL orders and sales
growth in 2023 in Europe and North America underpinned by the
continued investment in new and existing propulsion technologies,
as well as increased spending in commercial space and
defence.
In civil aerospace, we are seeing
strong demand for our expertise to support the development of
alternative propulsion technologies including electrification and
hydrogen-based solutions. We secured a large order from a major
engine manufacturer for our latest Fusion
DAQ product and sound & vibration software to support the
development of its next-generation gas turbine.
We saw strong growth in our
leading real-time computation software that provides critical
simulations in defence applications enabling pinpoint accuracy and
used in systems such as threat detection. Also, during the year we secured a major order from BAE
systems to supply hull vibration monitoring equipment for the UK
Royal Navy's shipbuilding programme. Our solution includes
transducers, data acquisition, and vibration measurement and
analysis software.
And in civil space, a market which
is growing quickly, with significant future potential, we are
seeing continued growth in demand for our piezo-electric vibration
sensing systems, which have been used in a number of customer
applications.
We were proud to
provide Dynetics
with a solution to evaluate the capabilities of its United Launch
Alliance Vulcan Centaur booster to ensure it can cope with extreme
forces during space flight. Our solution, based on proven and
precise structural testing tools, comprised a data acquisition
system to acquire data from more than 3,000 strain gauges and over
300 full-bridge pressure transducers, along with additional
sensors. As a result of deploying the solution, Dynetics improved
the efficiency and accuracy of testing enabling it to provide
better services to its customers and commercial space
projects.
We remain well placed to support
long-term innovation projects. OEMs continue to invest in
sustainable fuels, efficiency gaining technologies, especially
weight saving and power improvements. We also see demand increasing
for energy transition related projects, including electric aircraft
and those running on alternative lower-carbon fuels. Our sound and
vibration and EPT solutions are well placed to capture
this.
Academia
LFL sales into universities and
research institutes grew strongly, with orders also up on the prior
year, underpinned by the same core trends that underpin the
Division, notably growth in virtual testing, digitalisation and
electrification, with initiatives to reduce carbon emissions and
deliver Net Zero ambitions.
Consumer electronics and telecoms
LFL sales and demand in consumer
electronics and telecoms, which represented 6% of Dynamics sales
were lower than the comparative period, reflecting reduced levels
of customer investment in end-of-line-testing.
Investing for growth: R&D is driving growth and market
share gains
The organisation of the Division
around Virtual Test, Physical Test and In-Process allows us to
leverage growth and customer intimacy from our domain expertise.
These three sectors align with our customers' test and measurement
requirements, as their products are conceived, developed, then
manufactured and maintained.
By focusing on our customers'
needs, through their product lifecycle, we are able to accelerate
innovation, save costs and reduce time to market for their
products, with key R&D focus areas including: enhanced virtual
test solutions; simulation and analytic software; electric power
testing; data acquisition ecosystem; and smart and OEM
sensors.
During 2023, we launched a number
of new products. In Virtual Test, the launch of our COMPACT
FSS broadened and strengthened our simulator portfolio. Powered by
a VI-grade AutoHawk real-time
computer, the FSS provides highly accurate
and immersive motion, vibration, and sound simulation in a small
footprint. It also enables human-in-the-loop simulation,
which is the vital connection between objective physical
characteristics with subjective human perception.
As well as delivering 55 OEM
customer prototypes, we introduced newly developed smart force
sensors that link to a standard industrial interface enabling
simplified machine design and point of measure decision-making,
ensuring improved efficiency and
simplified machine operation.
We continue to develop our new
Fusion and Advantage data acquisition offering with additional
products expected to be launched in 2024. And in our software
business, which represents around 15% of Spectris Dynamics
sales, we released a number of major
updates to our market-leading nCode durability and Reliasoft
reliability products and updated our perception software for
EPT.
Investing for growth:
compounding growth through M&A
The acquisition of MicroStrain for
£29.1 million, which completed in September, represents an
excellent addition to Spectris Dynamics, bringing complementary
technology and strengthening our sensor offering,
particularly in the fast-growing autonomous mobility,
industrial and robotics markets. It also enables further
penetration into the rapidly growing automation and smart
manufacturing markets, while increasing our presence in North
America.
September 2023 marked the first
anniversary of the acquisition of Dytran, a leading designer and
manufacturer of piezo-electric and MEMS-based accelerometers and
sensors for measuring dynamic force, pressure, and vibration.
Integration has gone extremely well, including a significant
increase in productivity under our ownership. The business
has also made a meaningful and positive contribution to the
Division including securing a number of customer orders in
commercial space.
Operational excellence to drive margin
expansion
We are driving operational
excellence to improve productivity and increase operating margin
towards the Group target level. The ongoing rollout of the SBS
alongside our actions on pricing, product redesign to lower cost
solutions and portfolio rationalisation have all made a
contribution to the substantial 220bps improvement in adjusted
operating margin in the year.
In 2023, we embedded our 'Bronze,
Silver, Gold' certification programme to drive lean operations
across our core operations with three of our sites, Porto, Suzhou
and Marlborough, achieving Bronze certification by the end of the
year.
At our Suzhou facility, through
numerous kaizen events and increased automation, we delivered 30%
reduction in lead time as well as labour and inventory cost savings
of over 40% for a key product family with a total cost reduction
from improvement projects of £0.8 million. Through optimisation of sea /air and courier strategies we
also delivered a significant reduction in freight costs in excess
of £2.1 million and our
Net Zero improvement projects across our
facilities, resulted in £0.3 million in energy savings.
Alongside this we have made good
progress preparing for the further operational transformation
through a new CRM and ERP solution which is being introduced in
2024 across the whole Division, creating a simpler, common and more
scalable set of processes. Benefits from the new solution will
start to be realised from 2025 and it also represents a key
building block in driving further margin expansion in the
Division.
Summary
Spectris Dynamics is an
established leader in high-performance virtual and physical test,
design software, data acquisition and sensing. We are well
positioned in strong end markets supported by sustainable trends
for a digitising and de-carbonising world. We are executing and
expanding on strong fundamentals - integrated virtual and physical
test solutions, more software-oriented R&D, operational
excellence, and strategic value creating M&A. Having delivered
a strong performance in 2023, we remain focused on margin expansion
through strategic growth initiatives, business process improvement
and benefiting from our lean culture.
Derek Harding
Chief Financial Officer
Consolidated Income Statement
For the year ended 31 December 2023
|
|
2023
|
2022
|
Continuing operations
|
Note
|
£m
|
£m
|
Revenue
|
2
|
1,449.2
|
1,327.4
|
Cost of sales
|
|
(611.1)
|
(576.6)
|
Gross profit
|
|
838.1
|
750.8
|
|
|
|
|
Indirect production and
engineering expenses
|
|
(126.9)
|
(114.1)
|
Sales and marketing
expenses
|
|
(249.6)
|
(233.0)
|
Administrative expenses
|
|
(273.0)
|
(231.1)
|
Operating profit
|
2
|
188.6
|
172.6
|
|
|
|
|
Fair value through profit and loss
movements on debt investments
|
|
2.8
|
(4.1)
|
Share of post-tax results of
associates
|
|
(0.1)
|
-
|
(Loss)/profit on disposal of
businesses
|
|
(12.6)
|
0.3
|
Financial income
|
3
|
11.0
|
1.9
|
Finance costs
|
3
|
(4.1)
|
(19.2)
|
Profit before tax
|
|
185.6
|
151.5
|
|
|
|
|
Taxation charge
|
4
|
(40.2)
|
(36.7)
|
Profit for the year from continuing
operations
|
|
145.4
|
114.8
|
Profit for the year from
discontinued operations
|
|
-
|
286.7
|
Profit for the year from continuing and discontinued
operations attributable to owners of the Company
|
|
145.4
|
401.5
|
|
|
|
|
Earnings per share
|
|
|
|
From continuing operations
|
|
|
|
Basic
|
6
|
140.3p
|
106.7p
|
Diluted
|
6
|
139.4p
|
106.0p
|
From continuing and discontinued operations
|
|
|
|
Basic
|
6
|
140.3p
|
373.1p
|
Diluted
|
6
|
139.4p
|
370.7p
|
|
|
|
|
Dividends - amounts arising in respect of the
year
|
|
|
|
Interim dividend paid and final
dividend proposed/paid for the year (per share)
|
5
|
79.2p
|
75.4p
|
Dividends paid during the year
(per share)
|
5
|
76.6p
|
72.9p
|
Consolidated Statement of Comprehensive
Income
For the year ended 31 December 2023
|
|
2023
|
2022
|
|
|
£m
|
£m
|
Profit for the year attributable
to owners of the Company
|
|
145.4
|
401.5
|
Other comprehensive (loss)/income:
|
|
|
|
Items that will not be reclassified to the Consolidated
Income Statement:
|
|
|
|
Re-measurement of net defined
benefit obligation
|
|
(0.6)
|
13.1
|
Fair value (loss)/gain and foreign
exchange movements translation on investment in equity instruments
designated as at fair value through other comprehensive
income
|
|
(5.0)
|
5.0
|
Tax credit/(charge) on items
above
|
|
0.2
|
(4.0)
|
|
|
(5.4)
|
14.1
|
Items that are or may be reclassified subsequently to the
Consolidated Income Statement:
|
|
|
|
Net gain on effective portion of
changes in fair value of forward exchange contracts on cash flow
hedges
|
|
6.1
|
0.4
|
Foreign exchange movements on
translation of overseas operations
|
|
(42.5)
|
105.1
|
Currency translation differences
transferred to profit on disposal of businesses
|
|
-
|
(86.7)
|
Tax charge on items
above
|
|
(1.1)
|
-
|
|
|
(37.5)
|
18.8
|
Total other comprehensive (loss)/income
|
|
(42.9)
|
32.9
|
Total comprehensive income for the year attributable to
owners of the Company
|
|
102.5
|
434.4
|
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
|
Share
capital
|
Share
premium
|
Retained
earnings
|
Translation
reserve
|
Hedging
reserve
|
Merger
reserve
|
Capital redemption
reserve
|
Total
equity
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
At 1 January 2023
|
5.5
|
231.4
|
1,113.0
|
86.0
|
(3.1)
|
3.1
|
1.0
|
1,436.9
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
-
|
-
|
145.4
|
-
|
-
|
-
|
-
|
145.4
|
Other comprehensive
(loss)/income
|
-
|
-
|
(4.9)
|
(43.0)
|
5.0
|
-
|
-
|
(42.9)
|
Total comprehensive income/(loss) for the
year
|
-
|
-
|
140.5
|
(43.0)
|
5.0
|
-
|
-
|
102.5
|
|
|
|
|
|
|
|
|
|
Transactions with owners recorded
directly in equity:
|
|
|
|
|
|
|
|
|
Equity dividends paid by the
Company (note 5)
|
-
|
-
|
(79.7)
|
-
|
-
|
-
|
-
|
(79.7)
|
Own shares acquired for share
buyback programme (note 10)
|
(0.2)
|
-
|
(160.8)
|
-
|
-
|
-
|
0.2
|
(160.8)
|
Share-based payments, net of
tax
|
-
|
-
|
16.4
|
-
|
-
|
-
|
-
|
16.4
|
Proceeds from exercise of
equity-settled share options
|
-
|
-
|
0.6
|
-
|
-
|
-
|
-
|
0.6
|
At 31 December 2023
|
5.3
|
231.4
|
1,030.0
|
43.0
|
1.9
|
3.1
|
1.2
|
1,315.9
|
Year ended 31 December 2022
|
Share
capital
|
Share
premium
|
Retained
earnings
|
Translation
reserve
|
Hedging
reserve
|
Merger
reserve
|
Capital redemption
reserve
|
Total
equity
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
At 1 January 2022
|
5.8
|
231.4
|
957.6
|
66.2
|
(3.5)
|
3.1
|
0.7
|
1,261.3
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
-
|
-
|
401.5
|
-
|
-
|
-
|
-
|
401.5
|
Other comprehensive
income
|
-
|
-
|
12.7
|
19.8
|
0.4
|
-
|
-
|
32.9
|
Total comprehensive income for the year
|
-
|
-
|
414.2
|
19.8
|
0.4
|
-
|
-
|
434.4
|
|
|
|
|
|
|
|
|
|
Transactions with owners recorded
directly in equity:
|
|
|
|
|
|
|
|
|
Equity dividends paid by the
Company (note 5)
|
-
|
-
|
(78.6)
|
-
|
-
|
-
|
-
|
(78.6)
|
Own shares acquired for share
buyback programme (note 10)
|
(0.3)
|
-
|
(191.0)
|
-
|
-
|
-
|
0.3
|
(191.0)
|
Share-based payments, net of
tax
|
-
|
-
|
10.6
|
-
|
-
|
-
|
-
|
10.6
|
Proceeds from exercise of
equity-settled share options
|
-
|
-
|
0.2
|
-
|
-
|
-
|
-
|
0.2
|
At 31 December 2022
|
5.5
|
231.4
|
1,113.0
|
86.0
|
(3.1)
|
3.1
|
1.0
|
1,436.9
|
Consolidated Statement of Financial
Position
As at 31 December 2023
|
|
2023
|
2022
|
|
|
£m
|
£m
|
ASSETS
|
|
|
|
Non-current assets
|
|
|
|
Goodwill
|
|
565.5
|
606.1
|
Other intangible assets
|
|
167.1
|
184.1
|
Property, plant and
equipment
|
|
136.2
|
160.7
|
Right-of-use assets
|
|
58.1
|
59.7
|
Investment in equity
instruments
|
|
24.3
|
29.3
|
Investment in debt
instruments
|
|
21.7
|
18.9
|
Investment in
associates
|
|
10.8
|
2.9
|
Derivative financial
instruments
|
|
0.4
|
0.4
|
Other receivables
|
|
5.9
|
4.2
|
Deferred tax assets
|
|
26.6
|
16.2
|
Retirement benefit
assets
|
|
2.4
|
-
|
|
|
1,019.0
|
1,082.5
|
Current assets
|
|
|
|
Inventories
|
|
231.8
|
263.3
|
Current tax assets
|
|
7.2
|
8.6
|
Trade and other
receivables
|
|
317.9
|
362.5
|
Derivative financial
instruments
|
|
5.8
|
1.3
|
Cash and cash
equivalents
|
|
138.5
|
228.1
|
Assets held for sale
|
|
97.5
|
1.7
|
|
|
798.7
|
865.5
|
Total assets
|
|
1,817.7
|
1,948.0
|
LIABILITIES
|
|
|
|
Current liabilities
|
|
|
|
Borrowings
|
|
-
|
(0.1)
|
Derivative financial
instruments
|
|
(0.1)
|
(2.3)
|
Trade and other
payables
|
|
(369.4)
|
(373.7)
|
Lease liabilities
|
|
(14.4)
|
(14.9)
|
Current tax liabilities
|
|
(12.6)
|
(14.2)
|
Provisions
|
|
(8.5)
|
(12.8)
|
Liabilities held for
sale
|
|
(17.8)
|
-
|
|
|
(422.8)
|
(418.0)
|
Net current assets
|
|
375.9
|
447.5
|
Non-current liabilities
|
|
|
|
Other payables
|
|
(15.1)
|
(13.8)
|
Derivative financial
instruments
|
|
(0.1)
|
(0.2)
|
Lease liabilities
|
|
(48.3)
|
(50.2)
|
Provisions
|
|
(2.6)
|
(4.4)
|
Retirement benefit
obligations
|
|
(11.6)
|
(8.9)
|
Deferred tax
liabilities
|
|
(1.3)
|
(15.6)
|
|
|
(79.0)
|
(93.1)
|
Total liabilities
|
|
(501.8)
|
(511.1)
|
Net assets
|
|
1,315.9
|
1,436.9
|
EQUITY
|
|
|
|
Share capital
|
|
5.3
|
5.5
|
Share premium
|
|
231.4
|
231.4
|
Retained earnings
|
|
1,030.0
|
1,113.0
|
Translation reserve
|
|
43.0
|
86.0
|
Hedging reserve
|
|
1.9
|
(3.1)
|
Merger reserve
|
|
3.1
|
3.1
|
Capital redemption
reserve
|
|
1.2
|
1.0
|
Total equity attributable to owners of the
Company
|
|
1,315.9
|
1,436.9
|
|
|
|
| |
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
|
|
2023
|
2022
|
|
Note
|
£m
|
£m
|
Cash generated from operations
|
9
|
245.5
|
166.8
|
Net income taxes paid
|
|
(50.3)
|
(46.8)
|
Net cash inflow from operating activities
|
|
195.2
|
120.0
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
Purchase of property, plant and
equipment and intangible assets
|
|
(24.7)
|
(44.9)
|
Proceeds from disposal of
property, plant and equipment and software
|
|
3.1
|
13.4
|
Acquisition of businesses, net of
cash acquired
|
|
(49.5)
|
(114.7)
|
Acquisition of investment in an
associates
|
|
(7.8)
|
(2.9)
|
Inflow from disposal of
businesses, net of tax paid of £5.9m (2022: £27.9m)
|
|
3.3
|
365.4
|
Interest received
|
|
5.4
|
1.9
|
Net cash flows (used in)/from investing
activities
|
|
(70.2)
|
218.2
|
|
|
|
|
Cash flows used in financing activities
|
|
|
|
Interest paid on
borrowings
|
|
(1.0)
|
(1.4)
|
Interest paid on lease
liabilities
|
|
(0.2)
|
(2.5)
|
Dividends paid
|
5
|
(79.7)
|
(78.6)
|
Share buyback purchase of
shares
|
10
|
(114.9)
|
(191.0)
|
Net proceeds from exercise of
share options
|
|
0.6
|
0.2
|
Payments on principal portion of
lease liabilities
|
|
(15.4)
|
(13.9)
|
Proceeds from
borrowings
|
|
-
|
326.2
|
Repayment of borrowings
|
|
(0.1)
|
(326.8)
|
Net cash flows used in financing activities
|
|
(210.7)
|
(287.8)
|
|
|
|
|
Net (decrease)/increase in cash and cash
equivalents
|
|
(85.7)
|
50.4
|
Cash and cash equivalents at
beginning of year
|
|
228.1
|
167.8
|
Effect of foreign exchange rate
changes
|
|
(3.6)
|
9.9
|
Cash and cash equivalents at end of year
|
|
138.8
|
228.1
|
Notes to the accounts
1. Basis of preparation and accounting
policies
a) Basis of accounting
The Consolidated Financial
Statements of the Company for the 12 months ended 31 December 2023
comprise the Company and its subsidiaries, together referred to as
the 'Group'. These Consolidated 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
2023 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.
The 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 financial information included
in the full year results announcement does not constitute statutory
accounts of the Company for the years ended 31 December 2023 and
2022. Statutory accounts for the year ended 31 December 2022 have
been reported on by the Company's auditor and delivered to the
Registrar of Companies. Statutory accounts for the year ended 31
December 2023 have been audited and will be delivered to the
Registrar of Companies following the Company's Annual General
Meeting. The report of the auditors for both years was (i)
unqualified, (ii) did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement
under Section 498 (2) or (3) of the Companies Act 2006.
The Consolidated Financial
Statements have been prepared on a historical cost basis except for
items that are required by IFRS to be measured at fair value,
principally certain financial instruments. The Consolidated
Financial Statements have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and UK adopted IFRS. The
Consolidated Financial Statements have been prepared on a going
concern basis. The full year results announcement is presented in
millions of pounds Sterling rounded to the nearest one decimal
place, which is the Group's presentational currency.
These results were approved by the
Board of Directors on 28 February 2024.
New standards and interpretations applied for the first
time
In the current year there are no
new standards and interpretations that have had a material impact
on the Group's Statement of Financial Position. The
accounting policies set out in the 2023 Annual Report and Accounts
have been applied consistently to both periods presented in these
Consolidated Financial Statements.
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.
b) Going concern
In determining the basis of
preparation for the 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 current
macroeconomic factors and Climate Change on the Group, which are
described in the Chief Executive's Review and Financial
Review.
The Group finances its operations
from retained earnings and, where appropriate, from third-party
borrowings. Total borrowings as at 31 December 2023 were £nil
(2022: £0.1 million).
As at 31 December 2023, the Group
had £393.1 million of committed facilities, consisting entirely of
a $500 million multi-currency revolving credit facility (RCF)
maturing in July 2025. The RCF was undrawn at 31 December 2023
(2022: undrawn).
The RCF has a leverage (covenant
defined net debt/EBITDA) covenant of up to 3.5 times. The Group
regularly monitors its financial position to ensure that it remains
within the terms of its banking covenants. At 31 December
2023, there was net finance income for covenant purposes of £3.9
million, resulting in the interest cover ratio being n/a (31
December 2022: n/a). The minimum covenant interest cover
requirement is 3.75 times (covenant defined earnings before
interest, tax and amortisation divided by net finance charges).
Leverage (covenant defined earnings before interest, tax,
depreciation, and amortisation divided by net cash) was less than
zero (31 December 2022: less than zero), due to the Group's net
cash position, against a maximum permitted leverage of 3.5
times.
In addition to the above, after
adjusting for £0.3 million of cash and cash equivalents included in
the 'assets held for sale' line of the Consolidated Statement of
Financial Position, at 31 December 2023, the Group had a cash and
cash equivalents balance of £138.5 million. The Group also had
various uncommitted facilities and bank overdraft facilities
available which were all undrawn, resulting in a net cash position
of £138.8 million, including cash in 'assets held for sale', a
decrease of £89.2 million from £228.0 million at 31 December
2022.
The Group has prepared and
reviewed cash flow forecasts for the period to 31 December 2028,
which reflect forecasted changes in revenue across its business and
performed a reverse stress test of the forecasts to determine the
extent of downturn which would result in insufficient liquidity or
a breach of banking covenants. Revenue would have to reduce by 38%
over the period under review for the Group to breach covenants on
its debt facility. The reverse stress test does not take into
account further mitigating actions which the Group would implement
in the event of a severe and extended revenue decline, such as
cancelling the dividend or reducing capital expenditure. 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 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 Consolidated Financial Statements. There are no key
sensitivities identified in relation to this conclusion.
2. Operating segments
The Group's reportable segments
are described below. The segmental divisional structure reflects
the current 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 segment results include an
allocation of head office expenses, where the costs are
attributable to a segment. Costs of running the PLC are reported
separately as Group costs.
The following summarises the
operations in each of the Group's reportable segments:
· Spectris Scientific provides advanced measurement and
materials characterisation, accelerating innovation and efficiency
in R&D and manufacturing. The operating companies in this
segment are Malvern Panalytical and Particle Measuring
Systems;
· Spectris Dynamics provides differentiated sensing, data
acquisition, analysis modelling and simulation solutions to help
customers accelerate product development and enhance product
performance;
· The
Other non-reportable segments are a portfolio of high value
precision in-line sensing and monitoring businesses. The operating
companies in this segment are Red Lion Controls and Servomex;
and
· Group costs consist of the cost of running the
PLC.
Information about reportable segments
|
Spectris
Scientific
|
Spectris
Dynamics
|
Other
|
Group
costs
|
Total
|
For the year ended 31 December 2023
|
£m
|
£m
|
£m
|
£m
|
£m
|
Segment revenues
|
704.4
|
542.8
|
202.2
|
-
|
1,449.4
|
Inter-segment revenue
|
(0.2)
|
-
|
-
|
-
|
(0.2)
|
External revenue
|
704.2
|
542.8
|
202.2
|
-
|
1,449.2
|
|
|
|
|
|
|
Operating profit
|
124.4
|
56.2
|
33.2
|
(25.2)
|
188.6
|
Share of post-tax results of
associates
|
(0.4)
|
0.3
|
-
|
-
|
(0.1)
|
Fair value through profit and loss
movements on debt investments1
|
|
|
|
|
2.8
|
Loss on disposal of
businesses1
|
|
|
|
|
(12.6)
|
Financial
income1
|
|
|
|
|
11.0
|
Finance
costs1
|
|
|
|
|
(4.1)
|
Profit before
tax1
|
|
|
|
|
185.6
|
Taxation
charge1
|
|
|
|
|
(40.2)
|
Profit after tax from continuing
operations1
|
|
|
|
|
145.4
|
1. Not
allocated to reportable segments
|
Spectris
Scientific
|
Spectris
Dynamics
|
Other
|
Group costs
|
Total
|
Year ended 31 December 2022
|
£m
|
£m
|
£m
|
£m
|
£m
|
Segment revenues
|
658.0
|
492.4
|
177.4
|
-
|
1,327.8
|
Inter-segment revenue
|
(0.2)
|
(0.2)
|
-
|
-
|
(0.4)
|
External revenue
|
657.8
|
492.2
|
177.4
|
-
|
1,327.4
|
|
|
|
|
|
|
Operating profit
|
118.3
|
46.5
|
26.2
|
(18.4)
|
172.6
|
Fair value through profit and loss
movements on debt investments1
|
|
|
|
|
(4.1)
|
Profit on disposal of
businesses1
|
|
|
|
|
0.3
|
Financial
income1
|
|
|
|
|
1.9
|
Finance
costs1
|
|
|
|
|
(19.2)
|
Profit before
tax1
|
|
|
|
|
151.5
|
Taxation
charge1
|
|
|
|
|
(36.7)
|
Profit after tax from continuing
operations1
|
|
|
|
|
114.8
|
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.
|
|
2023
|
2022
|
|
|
£m
|
£m
|
UK
|
|
56.1
|
51.2
|
Germany
|
|
141.6
|
123.4
|
France
|
|
51.1
|
44.8
|
Rest of Europe
|
|
197.3
|
172.4
|
USA
|
|
377.5
|
359.9
|
Rest of North America
|
|
37.1
|
30.0
|
Japan
|
|
78.3
|
69.5
|
China
|
|
249.8
|
233.6
|
South Korea
|
|
52.5
|
58.4
|
Rest of Asia
|
|
142.7
|
125.5
|
Rest of the world
|
|
65.2
|
58.7
|
|
|
1,449.2
|
1,327.4
|
3. Financial income and finance
costs
|
|
2023
|
2022
|
Financial income from continuing operations
|
|
£m
|
£m
|
Interest receivable
|
|
(5.3)
|
(1.9)
|
Net gain on retranslation of
short-term inter-company loan balances
|
|
(5.7)
|
-
|
|
|
(11.0)
|
(1.9)
|
|
|
2023
|
2022
|
Finance costs from continuing operations
|
|
£m
|
£m
|
Interest payable on loans and
overdrafts
|
|
1.4
|
1.8
|
Net loss on retranslation of
short-term inter-company loan balances
|
|
-
|
14.6
|
Unwinding of discount factor on
lease liabilities
|
|
2.4
|
2.5
|
Net interest cost on pension plan
obligations
|
|
0.3
|
0.3
|
|
|
4.1
|
19.2
|
|
|
|
|
Net finance (credit)/costs from
continuing operations
|
|
(6.9)
|
17.3
|
4. Taxation
|
|
|
2023
|
|
|
|
2022
|
|
UK
|
Overseas
|
Total
|
|
UK
|
Overseas
|
Total
|
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
Current tax charge
|
5.3
|
54.3
|
59.6
|
|
4.8
|
41.2
|
46.0
|
Adjustments in respect of current
tax of prior years
|
(0.5)
|
(0.3)
|
(0.8)
|
|
(1.4)
|
(1.4)
|
(2.8)
|
Deferred tax - origination and
reversal of temporary differences
|
(1.9)
|
(16.7)
|
(18.6)
|
|
(1.3)
|
(5.2)
|
(6.5)
|
Taxation charge from continuing
operations
|
2.9
|
37.3
|
40.2
|
|
2.1
|
34.6
|
36.7
|
The standard rate of corporation
tax for the year, based on the weighted average of tax rates
applied to the Group's profits, is 24.2% (2022: 23.8%). The tax
charge for the year is lower (2022: higher) than the tax charge
using the standard rate of corporation tax for the reasons set out
in the following reconciliation:
|
2023
|
2022
|
|
£m
|
£m
|
Profit before taxation from
continuing operations
|
185.6
|
151.5
|
Corporation tax charge at standard
rate of 24.2% (2022: 23.8%)
|
44.9
|
36.1
|
Permanent tax differences on
loss/(profit) on disposal of businesses
|
2.8
|
(0.1)
|
Other non-deductible
expenditure
|
4.5
|
9.1
|
Tax credits and
incentives
|
(9.9)
|
(7.6)
|
Adjustments to prior year current
and deferred tax charges
|
(2.1)
|
(0.8)
|
Taxation charge
|
40.2
|
36.7
|
The Group's standard rate of
corporation tax of 24.2% is marginally higher than the prior year
rate (23.8%), principally due to profits being made in countries
with higher statutory tax rates.
'Permanent tax differences on
loss/profit on disposal of businesses' in the current year relates
to the restriction of tax deductions for losses on the sale of
shares in certain countries.
'Other non-deductible expenditure'
in the prior year includes the £3.4 million impact of
non-deductible foreign exchange losses.
'Tax credits and incentives'
above, refers principally to research and development tax credits
and other reliefs for innovation, such as the UK Patent Box regime
and Dutch Innovation Box regime, as well as tax reliefs available
for Foreign Derived Intangible Income in the US.
The following tax
(credits)/charges relate to items of income and expense that are
excluded from the Group's adjusted performance measures:
|
2023
|
2022
|
|
£m
|
£m
|
Tax credit on amortisation of
acquisition-related intangible assets
|
(4.7)
|
(4.6)
|
Tax credit on net
transaction-related costs and fair value adjustments
|
(1.7)
|
(0.5)
|
Tax charge on retranslation of
short-term inter-company loan balances
|
0.3
|
0.6
|
Tax credit on loss on disposal of
businesses
|
(0.2)
|
-
|
Tax credit on configuration and
customisation costs carried out by third parties on material SaaS
projects
|
(10.8)
|
(5.1)
|
Tax charge/(credit) on fair value
through profit and loss movements on debt and equity
investments
|
0.6
|
(1.4)
|
Total tax credit
|
(16.5)
|
(11.0)
|
The effective adjusted tax rate
for the year was 21.5% (2022: 21.7%) as set out in the
reconciliation below:
|
2023
|
2022
|
Reconciliation of the statutory taxation charge to the
adjusted taxation charge
|
£m
|
£m
|
Statutory taxation
charge
|
40.2
|
36.7
|
Tax credit on items of income and
expense that are excluded from the Group's adjusted profit before
tax
|
16.5
|
11.0
|
Adjusted taxation
charge
|
56.7
|
47.7
|
The Group has applied the
temporary exception included in IAS 12 'Income Taxes' from
recognising or disclosing information about deferred tax related to
'Pillar Two' income taxes. This mandatory temporary exception was
included in the narrow scope amendments to IAS 12 published by the
International Accounting Standards Board in May
2023.
The UK legislation to implement
the OECD BEPS 'Pillar Two' or 'GloBE' minimum tax rules was
substantively enacted in June 2023. The rules will apply to
Spectris from 1 January 2024. We anticipate that these legislative
changes could give rise to limited upward pressure on the Group's
adjusted effective tax rate from 2024. We currently estimate that
the GloBE rules could increase the Group's adjusted effective tax
rate by in the region of 1 percentage point. for 2024. The impact
is expected to arise due to the Group receiving tax incentives for
innovation under local laws in certain countries which, in limited
circumstances, can reduce effective tax rates below 15%. The Group
is continuing to assess the impact of Pillar Two income tax
legislation.
5. Dividends
|
|
2023
|
2022
|
Amounts recognised and paid as distributions to owners of the
Company in the year
|
|
£m
|
£m
|
Interim dividend for the year
ended 31 December 2023 of 25.3p (2022: 24.1p) per share
|
|
26.0
|
25.3
|
Final dividend for the year ended
31 December 2022 of 51.3p (2022: 48.8p) per share
|
|
53.7
|
53.3
|
|
|
79.7
|
78.6
|
|
|
|
|
|
|
2023
|
2022
|
Amounts arising in respect of the year
|
|
£m
|
£m
|
Interim dividend for the year
ended 31 December 2023 of 25.3p (2022: 24.1p) per share
|
|
26.0
|
25.3
|
Proposed final dividend for the
year ended 31 December 2023 of 53.9p (2022: 51.3p) per
share
|
|
54.8
|
53.6
|
|
|
80.8
|
78.9
|
The proposed final 2023 dividend
is subject to approval by shareholders at the AGM on 23 May 2024
and have not been included as a liability in these Consolidated
Financial Statements.
6. Earnings per share
Basic earnings per share amounts
are calculated by dividing net profit for the year attributable to
ordinary shareholders by the weighted average number of ordinary
shares outstanding during the period (excluding treasury
shares).
Diluted earnings 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 year but adjusted for the effects of
dilutive options.
Basic earnings per share from continuing
operations
|
|
2023
|
2022
|
Profit after tax from continuing
operations (£m)
|
|
145.4
|
114.8
|
Weighted average number of shares
outstanding (millions)
|
|
103.6
|
107.6
|
Basic earnings per share from
continuing operations (pence)
|
|
140.3
|
106.7
|
Diluted earnings per share from continuing
operations
|
|
2023
|
2022
|
Profit after tax from continuing
operations (£m)
|
|
145.4
|
114.8
|
Basic weighted average number of
shares outstanding (millions)
|
|
103.6
|
107.6
|
Weighted average number of
dilutive 5p ordinary shares under option (millions)
|
|
0.9
|
0.9
|
Weighted average number of 5p
ordinary shares that would have been issued at average market value
from proceeds of dilutive share options (millions)
|
|
(0.2)
|
(0.2)
|
Diluted weighted average number of
shares outstanding (millions)
|
|
104.3
|
108.3
|
Diluted earnings per share from
continuing operations (pence)
|
|
139.4
|
106.0
|
Basic earnings per share from discontinued
operations
|
|
2023
|
2022
|
Profit after tax from discontinued
operations (£m)
|
|
-
|
286.7
|
Weighted average number of shares
outstanding (millions)
|
|
103.6
|
107.6
|
Basic earnings per share from
discontinued operations (pence)
|
|
-
|
266.4
|
Diluted earnings per share from discontinued
operations
|
|
2023
|
2022
|
Profit after tax from discontinued
operations (£m)
|
|
-
|
286.7
|
Diluted weighted average number of
shares outstanding (millions)
|
|
104.3
|
108.3
|
Diluted earnings per share from
discontinued operations (pence)
|
|
-
|
264.7
|
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
MicroStrain
On 19 September 2023, the Group
acquired the MicroStrain Sensing Systems business (MicroStrain) for
a gross consideration of £29.1 million (consisting of £29.6 million
of cash paid and £0.5 million estimated completion true-up
receivable included in deferred consideration). MicroStrain is an
OEM and retailer of inertial and wireless sensor systems serving
industrial and tactical applications across different
industries. The transaction is in line with Spectris'
Strategy to make synergistic acquisitions to enhance and grow its
businesses. MicroStrain will be integrated into the Spectris
Dynamics reportable segment and cash generating unit.
The fair value of the assets and
liabilities acquired have been provisionally determined based on
the information available at the time. 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, order book and goodwill. Goodwill
arising is attributable to the assembled workforce, synergies from
cross-selling goods and services and cost synergies.
In the Consolidated Income
Statement for the year ended 31 December 2023, sales of £3.9
million and statutory operating loss of £0.8 million have been
included for the acquisition of MicroStrain. Group revenue and
statutory operating profit from continuing operations for the year
ended 31 December 2023 would have been £1,461.0 million and £189.9
million, respectively, had this acquisition taken place on the
first day of the financial year.
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 not
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 £1.5
million.
EMS
On 2 October 2023, the Group
acquired 100% of the share capital of Particle Measuring Technique
Ireland Limited (EMS) and its subsidiaries for net consideration of
£6.4 million, made up of £9.0 million gross consideration in cash
less £2.6 million net cash acquired. There was £0.4 million
deferred consideration recognised on this acquisition, which is
payable at a future date subject to no unexpected disputes relating
to the acquisition arising. EMS is a long-established partner and
exclusive distributor of Spectris Scientific's PMS products in the
UK and Ireland. The transaction is in line with Spectris' Strategy
to make synergistic acquisitions to enhance and grow its
businesses.
EMS will be integrated into the
Spectris Scientific reportable segment and the PMS 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, order book and goodwill. Goodwill
arising is attributable to the assembled workforce, synergies from
cross-selling goods and services and cost synergies.
In the Consolidated Income
Statement for the year ended 31 December 2023, sales of £0.4
million and statutory operating loss of £0.2 million have been
included for the acquisition of EMS. Group revenue and statutory
operating profit from continuing operations for the year ended 31
December 2023 would have been £1,453.9 million and £189.6 million,
respectively, had this acquisition taken place on the first day of
the financial year.
Where appropriate, a detailed
exercise has been undertaken to assess the fair value of assets
acquired and liabilities assumed. The valuation of the above
intangible and tangible assets requires the use of assumptions and
estimates. Intangible asset assumptions consist of future growth
rates, 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 not
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 £0.3
million.
XRD product line
On 27 October 2023, the Group
completed a technology and asset purchase agreement with Freiberg
Instruments to acquire the technology of the product line for six
x-ray diffraction (XRD) products for gross consideration of £13.0
million. There was £2.6 million deferred consideration recognised
on this acquisition. The transaction strengthens Spectris
Scientific portfolio in the semiconductor market. There are no
material contingent liabilities recognised in accordance with IFRS
3 (Revised). The fair value of the net assets is final. The
acquisition is included in the Spectris Scientific reportable
segment and the Malvern Panalytical 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 synergies from
cross-selling goods and services and cost synergies.
In the Consolidated Income
Statement for the year ended 31 December 2023, statutory operating
profit included £0.1 million of costs relating to the XRD product
line. Group revenue and statutory operating profit for the year
ended 31 December 2023 would have been £1,452.0 million and £188.9
million, respectively, had this acquisition taken place on the
first day of the financial year.
Acquisition-related costs
(included in administrative expenses) amounted to £0.8 million in
2023.
The fair values included in the
table below relate to the acquisition of MicroStrain, EMS and XRD
product line during the year:
|
MicroStrain
|
EMS
|
XRD product
line
|
Total fair
value
|
|
£m
|
£m
|
£m
|
£m
|
Intangible assets
|
11.2
|
4.5
|
6.0
|
21.7
|
Property, plant and
equipment
|
0.7
|
-
|
-
|
0.7
|
Right-of-use assets
|
1.0
|
0.1
|
-
|
1.1
|
Inventories
|
2.8
|
0.2
|
-
|
3.0
|
Trade and other
receivables
|
0.2
|
1.4
|
-
|
1.6
|
Cash and cash
equivalents
|
-
|
2.6
|
-
|
2.6
|
Trade and other
payables
|
(1.0)
|
(1.5)
|
-
|
(2.5)
|
Lease liabilities
|
(1.0)
|
-
|
-
|
(1.0)
|
Current tax liabilities
|
-
|
(0.1)
|
-
|
(0.1)
|
Deferred tax
liabilities
|
-
|
(0.6)
|
-
|
(0.6)
|
Net assets acquired
|
13.9
|
6.6
|
6.0
|
26.5
|
Goodwill
|
15.2
|
2.4
|
7.0
|
24.6
|
Gross consideration
|
29.1
|
9.0
|
13.0
|
51.1
|
Adjustment for cash
acquired
|
-
|
(2.6)
|
-
|
(2.6)
|
Net consideration
|
29.1
|
6.4
|
13.0
|
48.5
|
|
|
2023
|
2022
|
Analysis of cash outflow in Consolidated Statement of Cash
Flows
|
|
£m
|
£m
|
Gross consideration in respect of
acquisitions during the year
|
|
51.1
|
116.8
|
Adjustment for net cash
acquired
|
|
(2.6)
|
(1.5)
|
Net consideration in respect of
acquisitions during the year
|
|
48.5
|
115.3
|
Deferred and contingent
consideration on acquisitions included in net consideration during
the year to be paid in future years
|
|
(2.5)
|
(2.2)
|
Cash paid during the year in
respect of acquisitions during the year
|
|
46.0
|
113.1
|
Cash paid in respect of prior
years' acquisitions
|
|
3.5
|
1.6
|
Net cash outflow relating to acquisitions
|
|
49.5
|
114.7
|
8. Business disposals and disposal groups held for
sale
Business disposals
On 31 March 2023, the Group
disposed of 100% of the remaining part of its Concept Life Sciences
business, which formed part of the Spectris Scientific Division.
The consideration received was £15.5 million, settled in cash
received. The divestment was effected to offer a better opportunity
to generate returns for shareholders and further enhance Group
margins.
The loss on disposal of the
Concept Life Sciences business was calculated as
follows:
|
2023
|
|
£m
|
Goodwill
|
3.5
|
Other intangible assets
|
4.1
|
Property, plant and equipment -
owned and right of use assets
|
14.6
|
Inventories
|
0.6
|
Trade and other
receivables
|
6.1
|
Cash and cash
equivalents
|
1.9
|
Trade and other
payables
|
(3.0)
|
Lease liabilities
|
(3.6)
|
Current and deferred tax
liabilities
|
(0.6)
|
Net assets of disposed businesses
|
23.6
|
|
|
Consideration received
|
|
Settled in cash
|
115.5
|
Total consideration received
|
115.5
|
Transaction expenses booked to
profit on disposal of business
|
(2.2)
|
Net consideration from disposal of business
|
13.3
|
Net assets disposed of (including
cash and cash equivalents held by disposal group)
|
(23.6)
|
Loss on disposal of business
|
(10.3)
|
|
|
Net proceeds recognised in the Consolidated Statement of Cash
Flows
|
|
Consideration received settled in
cash
|
15.5
|
Cash and cash equivalents held by
disposed business
|
(1.9)
|
Transaction fees paid
|
(2.2)
|
Net proceeds recognised in the Consolidated Statement of Cash
Flows in respect of current year disposals
|
11.4
|
Payments made in respect of prior
years' disposals of businesses
|
(2.2)
|
Tax paid on prior year disposal of
businesses
|
(5.9)
|
Net proceeds recognised in the Consolidated Statement of Cash
Flows
|
3.3
|
Also included in loss on disposal
of business in the Consolidated Income Statement is £2.3 million of
transaction costs relating to prior year
disposals.
Disposal groups held for sale
On 11 December 2023, the Group
announced that agreement had been reached for the sale of the
Group's Red Lion Controls business, which forms part of the Other
operating segment. The required regulatory approvals were received
in January and February 2024 and the completion of the sale is
expected to take place during the second quarter of
2024.
The above operation, which is
expected to be sold within 12 months, has been classified as a
disposal group held for sale and presented separately in the
Consolidated Statement of Financial Position.
The proceeds from the disposal of
the Red Lion Controls business are expected to exceed the book
value of the related net assets and accordingly no impairment
losses have been recognised on the classification of these
operations as held for sale.
The major classes of assets and
liabilities comprising the operations classified as held for sale
at 31 December 2023 are as follows:
|
|
2023
|
|
|
£m
|
Goodwill
|
|
46.0
|
Other intangible assets
|
|
8.9
|
Property, plant and
equipment
|
|
8.3
|
Right-of-use assets
|
|
0.8
|
Inventories
|
|
22.9
|
Trade and other
receivables
|
|
10.3
|
Cash and cash
equivalents
|
|
0.3
|
Total assets classified as held for sale
|
|
97.5
|
|
|
|
Derivative financial
instruments
|
|
(0.1)
|
Trade and other
payables
|
|
(9.4)
|
Provisions
|
|
(0.9)
|
Lease liabilities
|
|
(0.8)
|
Current tax liabilities
|
|
(0.6)
|
Deferred tax
liabilities
|
|
(6.0)
|
Total liabilities classified as held for
sale
|
|
(17.8)
|
|
|
|
Net assets of disposal group
|
|
79.7
|
The net assets held for sale in
the year did not meet the definition of discontinued operations
given in IFRS 5 'Non-Current Assets Held for Sale and Discontinued
Operations' and, therefore, no disclosures in relation to
discontinued operations were made.
9. Cash generated from
operations
|
|
2023
|
2022
|
|
Note
|
£m
|
£m
|
Cash flows from operating activities
|
|
|
|
Profit after tax
|
|
145.4
|
401.5
|
Adjustments for:
|
|
|
|
Taxation charge
|
|
40.2
|
56.8
|
Loss/(profit) on disposal of
businesses
|
|
12.6
|
(294.2)
|
Share of post-tax results of
associates
|
|
0.1
|
-
|
Finance costs
|
3
|
4.1
|
19.2
|
Financial income
|
3
|
(11.0)
|
(1.9)
|
Depreciation and impairment of
property, plant and equipment
|
|
32.8
|
34.8
|
Amortisation, impairment and other
non-cash adjustments made of intangible assets
|
|
24.9
|
26.3
|
Transaction-related fair value
adjustments
|
|
7.5
|
1.0
|
Fair value through profit and loss
movements on debt investments
|
|
(2.8)
|
4.1
|
Profit on disposal and
re-measurement of property, plant and equipment and associated
lease liabilities
|
|
(0.5)
|
(1.5)
|
Equity-settled share-based payment
expense
|
|
13.1
|
10.4
|
Operating cash flow before changes in working capital and
provisions
|
|
266.4
|
256.5
|
Decrease/(increase) in trade and
other receivables
|
|
16.0
|
(47.9)
|
Decrease/(increase) in
inventories
|
|
1.5
|
(75.6)
|
(Decrease)/increase in trade and
other payables
|
|
(33.0)
|
40.9
|
Decrease in provisions and
retirement benefits
|
|
(5.4)
|
(7.1)
|
Cash generated from operations
|
|
245.5
|
166.8
|
10. Share buyback, treasury shares and employee benefit trust
shares
During the year ended 31 December
2023, 3,382,896 ordinary shares were repurchased and cancelled by
the Group, in the final tranches of the £300 million share buyback
programme announced on 19 April 2022 and part of the first tranche
of the £150 million share buyback announced on 11 December 2023.
This resulted in a cash outflow of £114.9 million, including
transaction fees of £1.2 million. The Consolidated Statement
of Financial Position also includes an accrual of £45.9 million for
share buyback liability as at 31 December 2023.
During the year ended 31 December
2022, 6,439,493 ordinary shares were repurchased and cancelled by
the Group as part of the £300 million share buyback programme
announced on 19 April 2022, resulting in a cash outflow of £191.0
million, including transaction fees of £1.2 million.
No ordinary shares were issued
upon exercise under share option schemes during the year (2022:
nil).
At 31 December 2023, the Group
held 4,128,036 treasury shares (2022: 4,596,698). During the year,
468,662 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 (2022: 170,408).
Appendix - Alternative performance measures
Policy
Spectris uses adjusted and
underlying 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 performance of
the businesses as they exclude certain items that are considered to
be significant in nature 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 or quantum
and where treatment as an adjusted item provides stakeholders with
additional useful information to better assess the period-on-period
trading performance of the Group.
Some of these items are material
in nature and the costs are expected to be incurred over
more than one reporting period.
The Group excludes such items
which management have defined for 2023 and 2022 as:
Items excluded
|
Significant in
nature/quantum
|
Amortisation of
acquisition-related intangible assets
|
Nature
|
Depreciation of
acquisition-related fair value adjustments to property, plant and
equipment
|
Nature
|
Transaction-related costs,
deferred and contingent consideration fair value
adjustments
|
Nature
|
Spectris Foundation
contribution1
|
Nature
|
Configuration and customisation
costs carried out by third parties on material SaaS
projects1
|
Quantum
|
Profits or losses on termination
or disposal of businesses
|
Nature
|
Unrealised changes in the fair
value of financial instruments
|
Nature
|
Fair value through profit and loss
movements on debt investments
|
Nature
|
Gains or losses on retranslation
of short-term inter-company loan balances
|
Nature
|
Related tax effects on the above
and other tax items which do not form part of the underlying tax
rate (see note 4)
|
Dependent on above classification
|
1 Multi-year project, where the cost is expected to continue
beyond the current reporting period
LFL measures
Reference is made to LFL and
organic measures throughout this document. LFL and organic have the
same definition, as set out below.
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 year.
The constant exchange rate
comparison uses the current year segmental information, stated in
each entity's functional currency, and translates the results into
its presentation currency using the prior year's monthly exchange
rates, irrespective of the underlying transactional
currency.
The incremental impact of business
acquisitions is excluded for the first 12 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.
On 31 March 2023, the Concept Life
Sciences business was disposed of and, as a result, the segmental
LFL adjusted sales and adjusted operating profit for the Spectris
Scientific segment for 2022 exclude the trading results of the
Concept Life Sciences business for the period from April 2022 to
December 2022.
The Omega business has been
classified as a discontinued operation under IFRS 5, following the
completion of its disposal on 1 July 2022. As a result, the
financial data for 2022 excludes the trading results of the Omega
business.
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
2023 LFL adjusted sales versus
2022 LFL adjusted sales
|
|
Spectris
Scientific
|
Spectris
Dynamics
|
Other
|
2023 Total
|
2023 sales by segment
|
|
£m
|
£m
|
£m
|
£m
|
Sales
|
|
704.2
|
542.8
|
202.2
|
1,449.2
|
Constant exchange rate adjustment
to 2022 exchange rates
|
|
13.2
|
1.9
|
0.9
|
16.0
|
Acquisitions
|
|
(0.4)
|
(21.3)
|
(1.4)
|
(23.1)
|
LFL adjusted sales
|
|
717.0
|
523.4
|
201.7
|
1,442.1
|
|
|
|
|
|
|
|
|
Spectris
Scientific
|
Spectris
Dynamics
|
Other
|
2022 Total
|
2022 sales by segment
|
|
£m
|
£m
|
£m
|
£m
|
Sales
|
|
657.8
|
492.2
|
177.4
|
1,327.4
|
Disposal of businesses
|
|
(17.7)
|
-
|
-
|
(17.7)
|
LFL adjusted sales
|
|
640.1
|
492.2
|
177.4
|
1,309.7
|
b) Adjusted operating
profit and adjusted operating margin
2023 LFL adjusted operating profit
versus 2022 LFL adjusted operating profit
2023 adjusted operating profit
|
Spectris
Scientific
|
Spectris
Dynamics
|
Other
|
Group
costs
|
2023 Total
|
£m
|
£m
|
£m
|
£m
|
£m
|
Statutory operating
profit
|
124.4
|
56.2
|
33.2
|
(25.2)
|
188.6
|
Net transaction-related costs and
fair value adjustments
|
6.4
|
3.1
|
4.5
|
-
|
14.0
|
Spectris Foundation
Contribution
|
-
|
-
|
-
|
1.0
|
1.0
|
Configuration and customisation
costs carried out by third parties on material SaaS
projects
|
19.4
|
20.6
|
-
|
-
|
40.0
|
Amortisation of
acquisition-related intangible assets
|
5.0
|
13.2
|
0.7
|
-
|
18.9
|
Adjusted operating
profit
|
155.2
|
93.1
|
38.4
|
(24.2)
|
262.5
|
Constant exchange rate adjustment
to 2022 exchange rates
|
1.5
|
0.5
|
(0.1)
|
-
|
1.9
|
Acquisitions
|
0.2
|
(2.5)
|
(0.3)
|
-
|
(2.6)
|
LFL adjusted operating
profit
|
156.9
|
91.1
|
38.0
|
(24.2)
|
261.8
|
2022 adjusted operating profit
|
Spectris
Scientific
|
Spectris
Dynamics
|
Other
|
Group
costs
|
2022
Total
|
£m
|
£m
|
£m
|
£m
|
£m
|
Statutory operating
profit
|
118.3
|
46.5
|
26.2
|
(18.4)
|
172.6
|
Net transaction-related costs and
fair value adjustments
|
5.1
|
2.8
|
0.4
|
-
|
8.3
|
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
|
8.7
|
13.0
|
-
|
-
|
21.7
|
Amortisation of
acquisition-related intangible assets
|
7.7
|
11.3
|
0.6
|
-
|
19.6
|
Adjusted operating
profit
|
140.0
|
73.6
|
27.2
|
(18.4)
|
222.4
|
Disposal of businesses
|
(0.7)
|
-
|
-
|
-
|
(0.7)
|
LFL adjusted operating
profit
|
139.3
|
73.6
|
27.2
|
(18.4)
|
221.7
|
|
|
Spectris
Scientific
|
Spectris
Dynamics
|
Others
|
2023 Total
|
2023 operating margin
|
|
%
|
%
|
%
|
%
|
Statutory operating
margin1
|
|
17.7
|
10.4
|
16.4
|
13.0
|
Adjusted operating
margin2
|
|
22.0
|
17.2
|
19.0
|
18.1
|
LFL adjusted operating
margin3
|
|
21.9
|
17.4
|
18.8
|
18.2
|
|
|
Spectris
Scientific
|
Spectris
Dynamics
|
Others
|
2022
Total
|
2022 operating margin
|
|
%
|
%
|
%
|
%
|
Statutory operating
margin1
|
|
18.0
|
9.4
|
14.8
|
13.0
|
Adjusted operating
margin2
|
|
21.3
|
15.0
|
15.3
|
16.8
|
LFL adjusted operating
margin3
|
|
21.8
|
15.0
|
15.3
|
16.9
|
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 gross
profit and adjusted gross margin
2023 LFL adjusted gross profit
versus 2022 LFL adjusted gross profit
|
|
2023
|
|
|
Total
|
2023 adjusted gross profit
|
|
£m
|
Statutory gross profit
|
|
838.1
|
Constant exchange rate adjustment
to 2022 exchange rates
|
|
2.7
|
Acquisitions
|
|
(9.8)
|
LFL adjusted gross
profit
|
|
831.0
|
|
|
|
|
|
2022
|
|
|
Total
|
2022 adjusted gross profit
|
|
£m
|
Statutory gross profit
|
|
750.8
|
Disposal of businesses
|
|
(8.0)
|
LFL adjusted gross
profit
|
|
742.8
|
|
|
2023
|
|
|
Total
|
2023 gross margin
|
|
%
|
Statutory gross
margin1
|
|
57.8
|
LFL adjusted gross
margin2
|
|
57.6
|
|
|
2022
|
|
|
Total
|
2022 gross margin
|
|
%
|
Statutory gross
margin1
|
|
56.6
|
LFL adjusted gross
margin2
|
|
56.7
|
1.
Statutory gross margin is calculated as statutory gross profit
divided by sales
2. LFL
adjusted gross margin is calculated as LFL adjusted gross profit
divided by LFL adjusted sales. Refer to the tables above for a
reconciliation of the nearest GAAP measure (sales/gross profit
respectively) to LFL adjusted sales/LFL adjusted gross
profit.
d) LFL Adjusted
overheads
|
|
2023 Total
|
2023 LFL adjusted overheads
|
|
£m
|
Statutory indirect production and
engineering expenses
|
|
(126.9)
|
Statutory sales and marketing
expenses
|
|
(249.6)
|
Statutory administrative
expenses
|
|
(273.0)
|
Total overheads
|
|
(649.5)
|
Net transaction-related costs and
fair value adjustments
|
|
14.0
|
Spectris Foundation
Contribution
|
|
1.0
|
Configuration and customisation
costs carried out by third parties on material SaaS
projects
|
|
40.0
|
Amortisation of
acquisition-related intangible assets
|
|
18.9
|
Constant exchange rate adjustment
to 2022 exchange rates
|
|
(0.8)
|
Acquisitions
|
|
7.2
|
LFL adjusted overheads
|
|
(569.2)
|
|
|
2022 Total
|
2022 LFL adjusted overheads
|
|
£m
|
Statutory indirect production and
engineering expenses
|
|
(114.1)
|
Statutory sales and marketing
expenses
|
|
(233.0)
|
Statutory administrative
expenses
|
|
(231.1)
|
Total overheads
|
|
(578.2)
|
Net transaction-related costs and
fair value adjustments
|
|
8.3
|
Depreciation of
acquisition-related fair value adjustments to property, plant and
equipment
|
|
0.2
|
Configuration and customisation
costs carried out by third parties on material SaaS
projects
|
|
21.7
|
Amortisation of
acquisition-related intangible assets
|
|
19.6
|
Disposal of businesses
|
|
7.3
|
LFL adjusted overheads
|
|
(521.1)
|
|
|
2023 Total
|
2023 LFL adjusted overheads as a
percentage of sales
|
|
%
|
LFL adjusted overheads as a
percentage of sales1
|
|
39.5
|
|
|
2022 Total
|
2022 LFL adjusted overheads as a
percentage of sales
|
|
%
|
LFL adjusted overheads as a
percentage of sales1
|
|
39.8
|
1. LFL
overheads as a percentage of sales is calculated as LFL adjusted
overheads divided by LFL adjusted sales. Refer to the tables above
for a reconciliation of the nearest GAAP measure (sales/total
overheads respectively) to LFL adjusted sales/LFL adjusted
overheads.
e) Adjusted net
finance costs
|
|
2023
|
2022
|
|
Note
|
£m
|
£m
|
Statutory net finance
credit/(costs)
|
3
|
6.9
|
(17.3)
|
Net (gain)/loss on retranslation
of short-term inter-company loan balances
|
|
(5.7)
|
14.6
|
Adjusted net finance
credit/(costs)
|
|
1.2
|
(2.7)
|
f) Adjusted
profit before taxation
|
|
2023
|
2022
|
|
|
£m
|
£m
|
Adjusted operating
profit
|
|
262.5
|
222.4
|
Share of post-tax results of
associates
|
|
(0.1)
|
-
|
Adjusted net finance
credit/(costs)
|
|
1.2
|
(2.7)
|
Adjusted profit before
taxation
|
|
263.6
|
219.7
|
g) Adjusted earnings
per share from continuing operations
|
|
2023
|
2022
|
Adjusted earnings
|
|
£m
|
£m
|
Statutory profit after tax from
continuing operations
|
|
145.4
|
114.8
|
Adjusted for:
|
|
|
|
Net transaction-related costs and
fair value adjustments
|
|
14.0
|
8.3
|
Spectris Foundation
Contribution
|
|
1.0
|
-
|
Depreciation of
acquisition-related fair value adjustments to property, plant and
equipment
|
|
-
|
0.2
|
Configuration and customisation
costs carried out by third parties on material SaaS
projects
|
|
40.0
|
21.7
|
Amortisation of
acquisition-related intangible assets
|
|
18.9
|
19.6
|
Fair value through profit and loss
movements on debt investments
|
|
(2.8)
|
4.1
|
Loss/(profit) on disposal of
businesses
|
|
12.6
|
(0.3)
|
Net (gain)/loss on retranslation
of short-term inter-company loan balances
|
|
(5.7)
|
14.6
|
Tax effect of the above and other
non-recurring items
|
|
(16.5)
|
(11.0)
|
Adjusted earnings from continuing
operations
|
|
206.9
|
172.0
|
|
|
2023
|
2022
|
Adjusted earnings per share from continuing
operations
|
|
£m
|
£m
|
Weighted average number of shares
outstanding
(millions)
|
|
103.6
|
107.6
|
Adjusted earnings per share from
continuing operations (pence)
|
|
199.7
|
159.9
|
Basic earnings per share in
accordance with IAS 33 'Earnings Per Share' are disclosed in note
6.
Financial position measures
h) Net cash
|
|
2023
|
2022
|
|
|
£m
|
£m
|
Bank overdrafts
|
-
|
(0.1)
|
Bank loans unsecured
|
-
|
-
|
Total borrowings
|
-
|
(0.1)
|
Cash and cash equivalents included
in assets held for sale
|
0.3
|
-
|
Cash and cash equivalents included
in current assets
|
138.5
|
228.1
|
Net cash
|
138.8
|
228.0
|
Net cash excludes lease
liabilities arising under IFRS 16 as this aligns with the
definition of net cash under the Group's bank covenants.
Reconciliation of changes in cash and cash equivalents to
movements in net cash
|
|
2023
|
2022
|
|
£m
|
£m
|
Net (decrease)/increase in cash
and cash equivalents
|
|
(85.7)
|
50.4
|
Proceeds from
borrowings
|
|
-
|
(326.2)
|
Repayment of borrowings
|
|
0.1
|
326.8
|
Effect of foreign exchange rate
changes
|
|
(3.6)
|
9.2
|
Movement in net cash
|
|
(89.2)
|
60.2
|
Net cash at beginning of
year
|
|
228.0
|
167.8
|
Net cash at end of year
|
|
138.8
|
228.0
|
Cash flow measures
i) Adjusted cash
flow
|
|
2023
|
2022
|
|
|
£m
|
£m
|
Cash generated from operations
(from continuing and discontinued operations)
|
245.5
|
166.8
|
Net income taxes paid
|
(50.3)
|
(46.8)
|
Net cash inflow from operating
activities
|
195.2
|
120.0
|
Transaction-related costs
paid
|
5.8
|
6.5
|
Restructuring cash
outflow
|
1.4
|
7.6
|
Net income taxes paid
|
50.3
|
46.8
|
Purchase of property, plant and
equipment and intangible assets (from continuing and discontinued
operations)
|
(24.7)
|
(44.9)
|
SaaS-related cash
expenditure
|
40.0
|
21.7
|
Proceeds from disposal of
property, plant and equipment and software
|
3.1
|
13.4
|
Adjusted cash flow from
discontinued operations
|
-
|
(7.3)
|
Adjusted cash flow from continuing
operations
|
271.1
|
163.8
|
Adjusted cash flow conversion from
continuing operations1
|
103%
|
74%
|
1.
Adjusted cash flow conversion is calculated as adjusted cash flow
as a proportion of adjusted operating profit.
Other measures
j) Return on
gross capital employed (ROGCE)
The ROGCE is calculated as
adjusted operating profit from continuing and discontinued
operations 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 cash and excluding
accumulated amortisation and impairment of acquisition-related
intangible assets including goodwill.
|
2023
|
2022
|
|
£m
|
£m
|
Net cash (see APM h)
|
(138.8)
|
(228.0)
|
Accumulated impairment losses on
goodwill including items transferred to assets held for
sale
|
40.6
|
76.2
|
Accumulated amortisation and
impairment of acquisition-related intangible assets including items
transferred to assets held for sale
|
149.9
|
185.7
|
Shareholders equity
|
1,315.9
|
1,436.9
|
Gross capital employed
|
1,367.6
|
1,470.8
|
Average gross capital employed (current and prior
year)1
|
1,419.2
|
1,473.4
|
|
|
|
Adjusted operating profit from continuing operations (see APM
b)
|
262.5
|
222.4
|
Adjusted operating profit from discontinued
operations
|
-
|
14.0
|
Total adjusted operating profit for last 12
months
|
262.5
|
236.4
|
|
|
|
ROGCE
|
18.5%
|
16.0%
|
1. Average
gross capital employed is calculated as current year gross capital
employed divided by comparative year gross capital
employed.
k) Net
transaction-related costs and fair value adjustments
Net transaction-related costs and
fair value adjustments comprise transaction costs of £6.5
million
(2022: £7.3 million) that have
been recognised in the continuing Consolidated Income Statement
under IFRS 3 (Revised) 'Business Combinations' and other fair value
adjustments relating to deferred and contingent consideration
comprising a charge of £7.5 million (2022: charge of £1.0
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 £5.8 million (2022:
£6.5 million) have been excluded from the adjusted cash
flow.
l) Order intake,
order book and book-to-bill
Order intake is defined as the
monetary value of contractual commitments towards future product
fulfilment recorded within the financial period. The order book is
defined as the volume of outstanding contractual commitments for
future product fulfilment measured at period end.
Book-to-bill is defined as the ratio of order intake to sales
within the financial period. These measures cannot be
reconciled because they do not derive from the Consolidated
Financial Statements, and are presented because they are indicative
of potential future revenues.
m) Vitality index
Vitality index measures revenue
recognised in the current year from products released over the
previous five years as a percentage of total revenue in the current
year, as shown in the Consolidated Income Statement.
|
2023
|
2022
|
|
£m
|
£m
|
Sales (see APM a)
|
1,449.2
|
1,327.4
|
Sales recognised in the current
year from products released over the previous five years
|
315.9
|
337.2
|
|
|
|
Vitality index
|
22%
|
25%
|
Dividend timetable - 2023 final dividend
Event
|
Date - 2024
|
Ex-dividend date
|
16 May 2024
|
Record date
|
17 May 2024
|
Record date for participation in
the Dividend Reinvestment Plan for the 2023 final
dividend
|
7 June 2024
|
Payment date
|
28 June 2024
|
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.