Spectris (SXS) H1 2024 earnings summary

Executive summary

• H1 2024 performance was impacted by softer end markets and ERP system rephasing, resulting in a 16% decline in sales to £589.7m and a 35% drop in adjusted operating profit to £61.1m, with £15m of profit and £22m of sales rephased to H2.

• Strategic execution included the sale of Red Lion Controls and acquisitions of SciAps and Micromeritics to strengthen advanced materials analysis and the Scientific division.

• Record new product launches and continued R&D investment underpin future organic growth and market share gains.

• £150 million share buyback program ongoing, with £100 million remaining to be completed in the next 12 months; interim dividend increased by 5% to 26.6p per share.

• Order book of £532 million provides good visibility for H2, supporting expectations of market improvement.

Financial highlights

• H1 2024 revenue was £589.7 million, down 16% year-over-year (like-for-like -10%), impacted by disposals and FX headwinds.

• Adjusted operating profit was £61.1 million (margin 10.4%), down 35%-40% year-over-year; statutory operating profit at £24.0 million.

• Adjusted EPS was 47.9p, down 38% year-over-year; statutory EPS up to 179.6p due to £210.6m-£210.9m profit on Red Lion disposal, driving statutory profit before tax to £235.3 million.

• Net cash at end-June was £292.5 million, with strong cash conversion at 111%.

• Return on gross capital employed stable at 16.8%.

Outlook and guidance

• Adjusted operating profit for FY 2024 expected in line with market expectations/consensus (£218.5m–£231.5m), excluding incremental profit from new acquisitions.

• Working capital to remain within 11–15% of sales; net debt expected at ~1.5x EBITDA by year-end; interest costs 5–6%; effective tax rate 23%.

• H2 capex projected at £25 million; SaaS costs at £30 million.

• Remaining £100 million of share buyback to be completed in the next 12 months.

• Market conditions expected to improve in H2, but timing remains uncertain.