Final Results
SPECTRIS PLC
2013 YEAR END RESULTS
27 February 2014 - Spectris plc (SXS: LSE), the productivity-enhancing instrumentation and controls company, announces preliminary results for the year ended 31 December 2013.
Highlights
• Good performance in challenging markets with improved conditions in H2
• R&D investment in Materials Analysis generates new products
• Omega international expansion proceeding well
• Adjusted earnings per share up 2%
• Net debt reduced by £150 million to £104 million
• Dividend up by 10%
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Key operational indicators (£m)*
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2013
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2012**
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Change
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Change at CER*** |
Organic change at CER**** |
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Sales |
1,197.8 |
1,177.2 |
+2% |
+1% |
- |
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Adjusted operating profit* |
214.7 |
216.9 |
-1% |
-3% |
-3% |
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Adjusted profit before tax* |
205.6 |
204.3 |
+1% |
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Adjusted earnings per share* |
132.9p |
130.3p |
+2% |
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Adjusted return on sales* |
17.9% |
18.4% |
-0.5pp |
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Dividend |
42.75p |
39.0p |
+10% |
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Statutory |
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Operating profit |
185.9 |
196.0 |
-5% |
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Profit before tax |
271.7 |
185.2 |
+47% |
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Basic earnings per share |
169.2p |
119.7p |
+41% |
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* The adjusted performance measures represent the statutory results excluding certain non-operational items and the trading results and impact of the disposal of the Fusion UV business on 31 January 2013. For a full reconciliation see Note 2 ** The 2012 comparatives have been restated following the adoption of IAS 19 (Revised) 'Employee Benefits' (see Note 1) *** At constant exchange rates **** At constant exchange rates excluding acquisitions |
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Commenting on the results, John O'Higgins, Chief Executive, said: "We are pleased with the performance of the business in 2013 despite unpredictable trading conditions. During 2014, we will continue to invest in our key growth programmes, new product pipeline and R&D. In addition, as previously highlighted, a return to sustainable growth will lead to a gradual reversal of the discretionary cost savings made in 2013. Overall, our broad geographic and end market exposures, strong financial position, and on-going investment in the business provide the Board of Spectris with confidence that the company is well positioned for 2014 and beyond."
Contacts:
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Spectris plc |
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John O'Higgins, Chief Executive |
+44 1784 470470 |
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Clive Watson, Group Finance Director |
+44 1784 470470 |
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Cléa Rosenfeld, Head of Corporate Affairs |
+44 1784 470470 |
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FTI Consulting |
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Richard Mountain / Susanne Yule |
+44 207 269 7186 |
The meeting with analysts will be available as a live webcast on the company's website at www.spectris.com, commencing at 08.30 GMT, and a recording will be posted on the website shortly after the meeting.
Copies of this notice are available to the public from the registered office at Heritage House, Church Road, Egham, Surrey TW20 9QD, and on the company's website at www.spectris.com
About Spectris
Spectris plc is a leading supplier of productivity-enhancing instrumentation and controls. The company's products, technologies and services enable customers to improve product quality and performance, improve core manufacturing processes, reduce downtime and wastage and reduce time to market. Its global customer base spans a diverse range of end user markets. Spectris operates across four business segments which reflect the applications and industries it serves: Materials Analysis, Test and Measurement, In-line Instrumentation and Industrial Controls. Headquartered in Egham, Surrey, England, the company employs approximately 7,400 people located in more than 30 countries.
For more information, visit www.spectris.com
CHAIRMAN'S AND CHIEF EXECUTIVE'S REVIEW
Results overview
Trading and macro-economic conditions were unpredictable throughout the year, but we are pleased with the overall performance of the business. The trading conditions experienced in the second half of the year were encouraging. Operating margins remained robust, thanks largely to a stable pricing environment and our ability to manage our discretionary cost base. Despite challenging markets, we maintained our key growth programmes, including an accelerated R&D budget to position our Materials Analysis businesses for growth in the pharmaceutical and material science sectors, and the continuing international expansion of the Omega Engineering business. We maintained our strategic focus across the group, including strengthening our presence in developing high growth regions of the world and launching new products and applications across the portfolio. Acquisition activity was less than usual with three bolt-on acquisitions completed, including two within the Materials Analysis segment.
Reported sales* grew by 2% to £1,197.8 million (2012: £1,177.2 million) with equal contributions, of just under 1% each, coming from acquisitions and foreign currency exchange movements. As a result, on a constant currency organic basis (like-for-like), sales for 2013 were broadly flat. On a reported basis, adjusted operating profit** declined by 1% to £214.7 million (2012: £216.9 million) and like-for-like operating profit decreased by 3%. Operating margins declined by 0.5 percentage points to 17.9%, principally as a consequence of adverse product mix. Interest charges were down in the year due to reduced debt levels, with the net result that profit before tax increased by 1% from £204.3 million to £205.6 million.
Regionally, sales to Europe grew 2% on a like-for-like basis, Asia Pacific increased 1% while North America declined 3%, mainly due to deferral of orders and a general lack of investments in academic research. Sales in the rest of the world grew by 4% with good trading activity recorded in South America and Africa. We exited the year with a strong performance in Asia Pacific and saw tentative signs of improvement in North America with fourth quarter sales up by 2%. Sales of aftermarket service and consumables grew by 7% on a like-for-like basis, and increased as a percentage of total revenue from 23% to 25%. More detail on the contribution made by each of the strategic segments can be found in the operating review which follows.
Financial position and dividend
Operating cash flow was solid with 86% of our operating profit being converted into cash and this, combined with the post-tax proceeds received on the sale of our Fusion UV business, resulted in net debt being reduced by £150.0 million. At the end of December 2013, our net debt stood at £104.1 million, just over 0.4 times the EBITDA of £236.3 million.
The Board is proposing to pay a final dividend of 28.0 pence per share which, combined with the interim dividend of 14.75 pence per share, gives a total of 42.75 pence per share for the year, an increase of 10%. The dividend is covered 3.1 times. This is consistent with our policy of making progressive dividend payments based upon affordability and sustainability. The dividend will be paid on 25 June 2014 to shareholders on the register at the close of business on 30 May 2014.
Strategy
We have a clearly defined strategy and made good progress against our objectives during the year. We continued to invest in new product development, increasing our R&D spend by 6% to
£88.1 million (+4% like-for-like increase over 2012). Most of this increase was channelled to our Materials Analysis segment with a 12% like-for-like increase in R&D spend to address the growth opportunities identified 18 months ago. We are starting to see the benefits of this initiative with new products launched towards the end of the year and more are scheduled in 2014. We also launched new products across our other three segments which strengthen our market positions.
Our regional expansion programme in emerging markets continued as we increased our direct presence in a number of emerging markets including Indonesia, the Middle East and Brazil. We established a legal entity in Russia with a new office in Moscow to support our recently-established direct selling operation in the region. On the back of its highly successful launch in China in 2012, our Omega business expanded its presence in a number of other new territories including Korea, Singapore, Brazil and Mexico. We also opened a new office in Japan in January 2014.
Management and Board
After 20 years at Spectris, Jim Webster announced his intention to retire from his role as Business Group Director at the end of the first half of 2014. Additionally, Steve Blair gave notice of his intention to resign from the company to join e2v technologies as Chief Executive and left the Board on 25 February 2014. Eoghan O'Lionaird joined us on 3 February 2014 and will assume Jim Webster's responsibilities for the Materials Analysis and Test and Measurement segments. During the second quarter of 2014, at a date to be confirmed, Jo Hallas will join the Executive team as Business Group Director for the In-line Instrumentation and Industrial Controls segments. Both Eoghan and Jo come to Spectris with a wealth of worldwide management experience within the Engineering sector.
Following Jeremy Morcom's departure earlier in 2013, we welcomed Robin Stopford last September to the Executive team as Head of Corporate Development.
We thank Jim, Steve and Jeremy for their valuable contributions to Spectris.
Spectris' values
Our values are central to Spectris, guiding our decision-making and ensuring that we always comply with the highest standards, wherever we are in the world. We want to be a company that our people are proud to work for, where they feel valued, motivated and capable of reaching their full potential. We want our employees to feel empowered to contribute to the growth of our group and we have created a culture of integrity that thrives on high performance. We believe that our values are pivotal to our success and growth and this has been demonstrated by the relentless commitment given by all our employees across the globe during the year.
Summary and outlook
We are pleased with the performance of the business in 2013 despite unpredictable trading conditions. During 2014, we will continue to invest in our key growth programmes, new product pipeline and R&D. In addition, as previously highlighted, a return to sustainable growth will lead to a gradual reversal of the discretionary cost savings made in 2013. Overall, our broad geographic and end market exposures, strong financial position, and on-going investment in the business provide the Board of Spectris with confidence that the company is well positioned for 2014 and beyond.
*The numbers stated in this report have been restated to exclude the trading results and impact of the disposal of the Fusion UV business which was disposed of on 31 January 2013.
**Unless otherwise stated, figures quoted for operating profit, net interest, profit before tax, tax, earnings per share and operating cash flow are adjusted measures - for an explanation of adjusted figures and reconciliation to the statutory reported figures see Note 2.
OPERATING REVIEW
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Materials Analysis |
Test and Measurement |
In-line Instrumentation |
Industrial Controls |
Total |
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2013 |
2012 |
2013 |
2012 |
2013 |
2012 |
2013 |
2012 |
2013 |
2012 |
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Sales (£m) |
362.4 |
348.1 |
348.7 |
345.4 |
265.7 |
266.5 |
221.0 |
217.2 |
1,197.8 |
1,177.2 |
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LFL growth |
2% |
5% |
-1% |
3% |
-1% |
- |
- |
- |
- |
2% |
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Adj. operating profit (£m) |
63.3 |
63.0 |
54.8 |
55.4 |
51.2 |
52.3 |
45.4 |
46.2 |
214.7 |
216.9 |
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% ROS |
17.5% |
18.1% |
15.7% |
16.0% |
19.3% |
19.6% |
20.6% |
21.3% |
17.9% |
18.4% |
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% Total group sales |
30% |
30% |
29% |
29% |
22% |
23% |
19% |
18% |
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% After sales |
29% |
29% |
21% |
19% |
43% |
40% |
3% |
1% |
25% |
23% |
MATERIALS ANALYSIS
Materials Analysis provides products that enable customers to determine structure, composition, quantity and quality of particles and materials, during their research and product development processes, when assessing materials before production, or during the manufacturing process. Our products help customers to improve accuracy and speed of materials analysis in the laboratory. We see a growing demand for the application of our solutions in quality and process control. Our key customers in this segment are leaders in the metals, minerals and mining, pharmaceutical and academic research industries. The operating companies in this segment are Malvern Instruments, PANalytical and Particle Measuring Systems.
Segment performance
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2013 |
2012 |
% change |
% change |
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Sales (£m) |
362.4 |
348.1 |
+4% |
+2% |
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Operating profit (£m) |
63.3 |
63.0 |
+1% |
-1% |
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Return on sales (%) |
17.5 |
18.1 |
-0.6pp |
-0.4pp |
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% of total group sales |
30 |
30 |
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After sales (%) |
29 |
29 |
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Reported sales increased by 4% with a 2 percentage point contribution from acquisitions. Like-for-like sales for this segment grew by 2% in the year, operating profit declined by 1% and operating margins were down by 0.4 percentage points, mainly as a result of increased R&D spending.
The additional R&D spending in this segment over the past 18 months has started to yield results with new product launches. Amongst these is the Viscosizer 200, which facilitates automated viscosity measurement and molecular sizing during bio-pharmaceutical formulation development using very small sample volumes. In September, we acquired NanoSight, a UK-based leading provider of particle size measurement instrumentation for material research, providing high resolution quantitative analysis of nano-particle materials which is highly complementary to our existing measurement capabilities.
Sales into the pharmaceutical sector performed well in 2013. Pharmaceutical manufacturers continue to invest in emerging markets and we received large orders from Brazil and China. We saw strong growth in China boosted by investments in instruments needed to secure compliance with the Good Manufacturing Process regulations for pharmaceutical companies as well as increasing domestic growth in healthcare.
Although sales to minerals and mining customers grew in 2013, this was on the back of a strong opening order book. As expected, demand in the metals sector weakened during the year, driven in part by overcapacity in China but also, more generally, as a result of reduced capital expenditure. We also saw lower investment levels from customers in the mining sector and, as a consequence, we took actions to reduce our cost base through a combination of restructuring actions and temporary cost saving measures.
Following the acquisition of Analytical Spectral Devices Inc. in late 2012, we launched the TerraSpec Halo during the year. The Halo, a new handheld infrared spectrometer, represents the lightest and fastest 'all-in-one' near infrared instrument available for exploration geology. In October 2013, we launched a new X-Ray Fluorescence ("XRF") benchtop system, the Epsilon 1. This product is a fully integrated energy dispersive XRF analyser consisting of a spectrometer and built-in touch-screen computer, offering dedicated solutions for applications in the petrochemical, mining and academic research sectors.
Sales to the academic research market declined in Asia and North America as government spending cuts impacted university budgets. However, this was partly compensated by growth in Europe where we saw increased spending throughout the region with strong growth recorded in Germany.
Segment outlook
We expect that new product introductions will provide growth in the pharmaceutical sector, albeit partly offset by slower growth in China as the boost provided by regulatory compliance with new manufacturing regulations trails off. Against this backdrop, we intend to maintain current levels of R&D spending in this segment in order to capture further growth opportunities. Academic research is likely to face continuing funding constraints in some regions but this has, in the past, proved to be a resilient sector. In the metals and mining sector, the weak order intake experienced throughout 2013 will translate into lower sales in 2014. In anticipation of this decline, the cost reduction actions we took in 2013 lowered our cost base and this lower cost base will be maintained until the timing of the recovery becomes clearer.
TEST AND MEASUREMENT
Test and Measurement supplies test, measurement, and analysis equipment and software for product design optimisation, manufacturing control, and environmental monitoring systems. Markets are principally the aerospace, automotive and consumer electronics industries. For customers in the automotive and aerospace industries, our products and applications help them to design and test new products whilst reducing time to market. In consumer electronics, our equipment and software enable customers to refine the performance and accuracy of their products and to test them in the production process. In the environmental monitoring market, the desire for higher standards of community comfort is creating additional demand. The operating companies in this segment are Brüel & Kjær Sound & Vibration and HBM.
Segment performance
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2013 |
2012 |
% change |
% change |
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Sales (£m) |
348.7 |
345.4 |
+1% |
-1% |
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Operating profit (£m) |
54.8 |
55.4 |
-1% |
-3% |
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Return on sales (%) |
15.7 |
16.0 |
-0.3pp |
-0.4pp |
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% of total group sales |
29 |
29 |
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After sales (%) |
21 |
19 |
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Reported sales in this segment grew by 1% with foreign currency exchange movements contributing almost 2 percentage points. Like-for-like sales declined by 1% in the year against a particularly strong comparative prior year. Operating margins were down by 0.4 percentage points, mainly as a consequence of the lower sales volume and adverse product mix.
Demand from the aerospace market was strong and we secured some important orders, including a noise and vibration testing system for Airbus and significant contract wins from original equipment manufacturers for regional and executive aircraft. In 2013, we delivered a static engine testing system to Pratt & Whitney and the successful qualification of their newest engine has opened up other opportunities for similar systems. We have seen good demand for our vibration test systems for communication satellites, particularly in Russia. We also saw good growth in demand for our engineering software products, which help manufacturers to accelerate time to market and reduce life-cycle costs. As an example, our nCode Automation software helped one of our customers to reduce engine testing time from two months to just one week.
Direct sales to the automotive market were down as customers, particularly in the first half of the year, remained cautious and order cycle times were consequently longer than usual. However, we are now seeing better demand from China, Brazil and India through direct sales channels as well as through systems integrator channels. New opportunities continue to develop in electric powertrain testing as well as vehicle noise and vibration optimisation. As part of our Noise Vibration and Harshness ("NVH") simulator product range, we developed a solution which provides active real-time vehicle interior noise management. Our Sonoscout product, a portable NVH in-vehicle data recorder, which we launched in the first half of 2013 following our NoViSim acquisition in 2012, has already delivered good results.
Sales to the consumer electronics market declined, partly against a strong comparative period in the first half of 2012 when we booked several large projects. However, our products continue to find applications in production quality control as well as R&D testing for devices such as smartphones and other audio devices.
Demand for our environmental noise monitoring services continued to be strong with growth coming from significant contract wins including Manchester Airport Group, Hong Kong Airport and all the Port Authority of New York and New Jersey airports. New opportunities for our Noise Sentinel industrial noise monitoring system included several mines in Brazil and Australia as well as a port operation and oil refinery in Canada.
In the latter part of 2013, we booked several important orders for our recently launched PMX data acquisition and control system which provides precise acquisition of parameters such as force, vibration, pressure and strain. Applications have included on-line monitoring of wind turbine towers and quality control in automotive component production.
Segment outlook
The investment climate looks set to be more positive for the automotive sector in 2014, as new car developments continue and vehicle manufacturers expand testing in emerging markets such as Brazil, China and India. We expect to see solid demand from the aerospace market with growth coming from the deployment of new applications as well as continued investments from existing customers. We should see some recovery in demand from the consumer electronics market, supplemented by demand for our production quality and testing applications for tablet computers and smartphones. Our environmental noise monitoring systems business will continue to contribute to an increased proportion of service business in this segment.
IN-LINE INSTRUMENTATION
In-line Instrumentation provides process analytical measurement, asset monitoring and on-line controls for both primary processing and the converting industries. Our products and applications provide precision measurement in challenging operating environments, ensuring process quality, asset uptime, safety, and improved yield. Our key customers are in the electronics, petrochemicals, oil and gas, pulp and paper, energy, manufacturing, automotive, and medical industries. The operating companies in this segment are Beta LaserMike, Brüel & Kjær Vibro, BTG Group, NDC Infrared Engineering, and Servomex.
Segment performance
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2013* |
2012* |
% change |
% change |
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Sales (£m)* |
265.7 |
266.5 |
- |
-1% |
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Operating profit (£m)* |
51.2 |
52.3 |
-2% |
-4% |
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Return on sales (%)* |
19.3 |
19.6 |
-0.3pp |
-0.5pp |
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% of total group sales* |
22 |
23 |
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After sales (%)* |
43 |
40 |
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*All numbers stated in this segment exclude the trading results and impact of the disposal of the Fusion UV business which was disposed of on 31 January 2013.
Reported sales for the year were broadly flat compared to 2012 with foreign currency exchange movements providing some modest support. Like-for-like sales for the segment declined 1% for the year, impacted mainly by longer order cycles and customers' capital expenditure deferrals. Operating margins for the year were down by 0.5 percentage points as a consequence of the lower sales volume and the cost of restructuring.
Pulp and paper performed well and we continue to see strong growth in demand for tissue, packaging and pulp applications, which more than compensate for declines in the graphic paper markets. We launched a range of fibre-line automation products which improve productivity, efficiency, and fibre quality whilst providing higher returns on investment for customers than conventional alternatives. In November, we acquired the PROdry business. This company has expertise in tissue process consulting and assists tissue manufacturers in achieving greater efficiency and productivity.
In the energy and utilities market, sales were up for the year with good demand in Asia Pacific but partly offset by declines in North America and Europe. Additionally, investment in this sector continues to grow in the Middle East and we have opened new offices to better support local customers. More than half of the new hydro power plants worldwide being built are in South America and we have booked another large order for a project in this region. We also received a significant order for our safety and condition monitoring system VC6000 for a greenfield refinery project in Vietnam. Industrial gas markets presented good growth opportunities during 2013 and we launched NanoChrome in the fourth quarter. NanoChrome is a specialist ultra high purity analyser for gases used in the semiconductor market and this product is already undergoing customer trials in the US and in Asia.
Converting, web and packaging industries (which include plastic, nylon and film) slowed in 2013. Asia declined but we saw encouraging signs of growth in North America and Europe in the latter half of the year. We are pleased with the immediate success of the new MiniTrak product, a compact scanner which provides critical measurements from constrained machine locations and having applications in rubber and nylon production. There was also good demand for our scanners from the food industry.
Segment outlook
We are seeing good growth opportunities in the Middle East and North America, specifically in oil and gas and petrochemicals. We also see potential in the pulp industry in South America, Indonesia and China, and continued growth demand from tissue manufacturers worldwide.
INDUSTRIAL CONTROLS
Industrial Controls provides products and solutions that measure, monitor, control, inform, track, and trace during the production process. Key customers are active in industrial manufacturing, automotive, electronics, packaging, and life sciences. Sales in this segment are mainly financed through customers' operating expenditure budgets so this segment is the least exposed to the industrial capital expenditure cycle. The operating companies in this segment are Microscan, Omega Engineering and Red Lion Controls.
Segment performance
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2013 |
2012 |
% change |
% change |
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Sales (£m) |
221.0 |
217.2 |
+2% |
- |
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Operating profit (£m) |
45.4 |
46.2 |
-2% |
-3% |
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Return on sales (%) |
20.6 |
21.3 |
-0.7pp |
-0.8pp |
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% of total group sales |
19 |
18 |
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After sales (%) |
3 |
1 |
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Reported sales were up 2% for the year, favourably impacted by foreign currency exchange effects. Like-for-like sales for this segment were broadly flat over the same period last year. Operating margins were down compared to the previous year, with a favourable mix being outweighed by our investment in the geographical expansion of the Omega Engineering business.
We started to see the benefits of the integration of our industrial automation and communication businesses following the recent acquisitions of Sixnet and N-Tron. The enhanced focus in key markets has already provided good results. A new family of Graphite™ display products was launched in the second half of 2013. It is the newest generation of Human Machine Interfaces ("HMIs") and provides the industry with the first rugged HMI solution to combine a wide range of versatile plug-in modules with protocol conversion, data logging and web-based monitoring and control. The new range is particularly suited to the oil and gas and utilities markets and the product has already been recognised in China with four industry awards. Also in China, we won a large multiple product order for the monitoring and communication networks for a major oil and gas corporation for one of its oil field and pipeline infrastructure projects.
It was a year of significant development for the Omega Engineering business. We expanded our presence in six new territories: Italy, Spain, Singapore, Korea, Brazil and Mexico. The Chinese office, opened in 2012, performed very well in its first full year. We also opened a new office in Japan in January 2014.
The robust activity seen in the clinical and original equipment manufacturer markets during the first half eased during the second half as customers substantially reduced inventory levels. However, our packaging bar-code products performed well, driven by food and beverage and fast moving consumer goods customers adopting ISO code verification. We are seeing increasing activity as a result of the Produce Traceability Initiative ("PTI") in North America. The PTI is an industry-wide effort to improve traceability throughout the food supply chain. During the second half of the year, we launched additional software enhancements, including German and Chinese language versions, for our smart camera inspection system, AutoVISION.
Segment outlook
We will continue to benefit from our expanded industrial networking business as well as the increased demand for greater factory automation. In addition, our short-cycle business is expected to further mitigate exposure to cyclicality associated with capital expenditure budgets. The global expansion of our Omega Engineering business, combined with the benefits provided by the integration of our industrial automation and communication businesses, positions our Industrial Controls segment well for the future.
FINANCIAL REVIEW
Introduction
Spectris uses adjusted figures as key performance measures in addition to those reported under adopted IFRS, as management believe these measures enable them to assess the underlying trading performance of the businesses. Adjusted figures exclude certain non-operational items which management has defined in Note 2 of the financial statements. Unless otherwise stated, figures quoted for operating profit, net interest, profit before tax, tax, earnings per share and operating cash flow are adjusted measures restated for IAS 19 (Revised) 'Employee Benefits' (see Note 1). In addition, all adjusted income statement and operating cash flow measures have been restated to exclude the trading results and impact of the disposal of the Fusion UV business ('Fusion') which was disposed of on 31 January 2013.
Operating performance
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2013 |
2012(1) |
Change |
Like-for-like change(2) |
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Sales (£m) |
1,197.8 |
1,177.2 |
1.8% |
0.2% |
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Adjusted operating profit (£m) |
214.7 |
216.9 |
-1.0% |
-2.7% |
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Operating margin (%) |
17.9 |
18.4 |
-0.5pp |
-0.5pp |
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Statutory(3) |
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Sales (£m) |
1,202.0 |
1,230.8 |
-2.3% |
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Operating profit (£m) |
185.9 |
196.0 |
-5.2% |
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Operating margin (%) |
15.5 |
15.9 |
-0.4pp |
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(1) The 2012 comparatives have been restated following the adoption of IAS 19 (Revised) 'Employee Benefits' (see Note 1)
(2) At constant exchange rates and excluding acquisitions
(3) The statutory figures include the results of the Fusion UV business which was disposed of on 31 January 2013
Reported sales were up 1.8% to £1,197.8 million (2012: £1,177.2 million). The year-on-year contribution to sales from acquisitions was £8.7 million (+0.7%) and favourable foreign exchange movements (primarily arising from the strengthening of the US dollar and euro, partly offset by the weakening of the Japanese yen, against sterling) contributed a further £10.0 million (+0.9%), with the result that, on an organic constant currency like-for-like ('LFL') basis, sales increased by 0.2% compared to 2012.
Following the challenging start to the year, the group took action to reduce its cost base through a combination of temporary cost saving measures and restructuring actions to protect profitability. Restructuring costs of £2.9 million were incurred during the year with benefits of £5.9 million arising in 2013. In addition, we identified £7.7 million of discretionary cost savings, taking the net benefit from our cost saving programme to £10.7 million for the year. Despite the cost saving measures taken, the group has continued to invest in its previously announced growth programmes in innovation (R&D +4% LFL) and in the continued international expansion of Omega Engineering.
Reported gross margins were in line with 2012 at 58.1% of sales, benefiting from foreign exchange (0.4pp) and acquisitions (0.1pp), with the result that LFL gross margins declined by 0.5pp. Further down the income statement, selling, general and administration costs were broadly flat on a LFL basis compared to 2012, with the net benefit from our cost savings programmes offsetting inflationary cost increases and funding our growth investment programmes in research and development and the international expansion of Omega. As a result of the foregoing, LFL operating profit declined by 2.7% and reported and LFL operating margins decreased by 0.5pp to 17.9%.
Net finance costs for the year decreased by £3.5 million to £9.1 million (2012: £12.6 million). This reduction is mainly due to lower average net debt levels compared to 2012, primarily as a result of the sale of the Fusion business in January 2013 and continued strong operating cash generation, with an operating cash flow conversion rate of 86% for the year (2012: 94%). Furthermore, the group benefited from a reduction in the weighted average interest rate on debt as market interest rates remained at historic lows and £95 million equivalent of higher margin US private placement debt was re-financed with a new seven-year term loan on significantly more favourable terms at the beginning of October.
Profit before tax increased by 0.6% from £204.3 million to £205.6 million.
Statutory operating profit, after including acquisition-related intangible asset amortisation of
£28.9 million (2012: £27.0 million) and net acquisition-related costs and fair value adjustments of £0.7 million (2012: £5.4 million), decreased by 5.2% from £196.0 million to £185.9 million.
Statutory profit before tax increased by 47% from £185.2 million in 2012 to £271.7 million in 2013, primarily reflecting the profit on disposal of Fusion of £98.3 million.
The reconciliation of statutory and adjusted measures is shown in the table below.
|
|
2013 |
2013 |
2013 |
2012 |
2012 |
2012 |
|
|
IFRS (Statutory) £m |
Adjust-ments(1) |
Spectris Adjusted £m |
|
|
|
|
Sales |
1,202.0 |
(4.2) |
1,197.8 |
|
|
|
|
Gross margin |
697.6 |
(2.1) |
695.5 |
|
|
|
|
Operating profit before acquisition-related items |
215.5 |
(0.8) |
214.7 |
|
|
|
|
Amortisation of acquisition-related intangibles |
(28.9) |
28.9 |
- |
|
|
|
|
Net acquisition-related costs and fair value adjustments |
(0.7) |
0.7 |
- |
|
|
|
|
|
185.9 |
28.8 |
214.7 |
|
|
|
|
Profit on disposal of businesses |
98.3 |
(98.3) |
- |
|
|
|
|
Increase in fair value of cross-currency interest rate swaps |
0.7 |
(0.7) |
- |
|
|
|
|
Net (loss)/gain on retranslation of short-term inter-company loan balances |
(4.1) |
4.1 |
- |
|
|
|
|
Net bank interest payable |
(8.6) |
- |
(8.6) |
|
|
|
|
Net IAS 19 (Revised) finance income |
(0.2) |
- |
(0.2) |
|
|
|
|
Other finance costs |
(0.3) |
- |
(0.3) |
|
|
|
|
|
271.7 |
(66.1) |
205.6 |
|
|
|
(1) Adjustments to sales, gross margin and operating profit before acquisition-related items represent the results of the Fusion business
(2) The 2012 comparatives have been restated following the adoption of IAS 19 (Revised) 'Employee Benefits' (see Note 1)
Acquisitions
On 27 September 2013, the group acquired NanoSight Limited, a company based in the UK, for a total consideration of £16.4 million (£14.6 million net of cash acquired), which extends the group's capabilities in particle size measurement instrumentation. In addition, the group acquired certain of the trade and assets of a previously held associate, Naneum Limited, for £1.3 million. Both of these acquisitions are part of the Materials Analysis segment.
The total cost of acquisitions in the year was £17.7 million (2012: £15.6 million), including
£1.8 million (2012: £0.5 million) for cash acquired. Included in the total cost of acquisitions is an amount of £0.5 million (2012: £5.0 million) attributable to the fair value of deferred and contingent consideration which is expected to be paid in future years. In addition, a further net £1.5 million (2012: £5.4 million) was paid in respect of prior year acquisitions, making the net cash outflow in the year £16.9 million (2012: £15.5 million). Furthermore, an amount of £1.3 million (2012: £0.7 million) was spent on acquisition-related legal and professional fees, which makes the total acquisition-related cash outflow for the year £18.2 million (2012: £16.2 million). Acquisitions contributed
£8.7 million (2012: £106.7 million) of incremental sales and £0.4 million (2012: £21.2 million) of incremental operating profit during the year.
Divestments
In line with the agreement signed on 18 December 2012, on 31 January 2013, the group disposed of Fusion, which was part of the In-line Instrumentation segment, for a total cash consideration of US$175 million (£105 million). The post-tax proceeds from the disposal were used to pay down debt.
The sales and operating profit contributed by Fusion in 2013 amounted to £4.2 million (2012:
£53.6 million) and £0.8 million (2012: £11.5 million), respectively.
Taxation
The effective tax rate on adjusted profits was 23.6% (2012: 25.3%), a decrease of 1.7pp, mainly due to areduction in the weighted average statutory tax rate on adjusted profits and a reduction in the group's on-going tax risk profile. On a statutory basis, the effective tax rate of 26.4% (2012: 24.3%) continues to be below the weighted average statutory tax rate of 30.9% (2012: 29.4%), primarily as a consequence of research and development tax incentives and a tax-efficient financing structure.
Earnings per share
Earnings per share increased by 2% from 130.3p to 132.9p, reflecting the net impact of the 0.6% increase in profit before tax and the 1.7pp reduction in the effective tax rate being offset by the increase in the weighted average number of shares from 117.1 million in 2012 to 118.2 million in 2013.
Statutory basic earnings per share increased by 41% from 119.7p to 169.2p. The difference between the two measures is shown in the table below.
|
|
2013 Pence |
2012(1) Pence |
|
Statutory basic earnings per share |
169.2 |
119.7 |
|
Amortisation of acquisition-related intangible assets |
24.4 |
23.0 |
|
Net acquisition-related costs and fair value adjustments |
0.6 |
4.6 |
|
Profit on disposal of businesses |
(83.2) |
- |
|
Increase in fair value of cross-currency interest rate swaps |
(0.6) |
(0.8) |
|
Net loss/(gain) on retranslation of short-term inter-company loan balances |
3.5 |
(0.8) |
|
Tax effect of the above and other non-recurring items |
19.3 |
(9.1) |
|
Divested businesses |
(0.3) |
(6.3) |
|
Earnings per share |
132.9 |
130.3 |
(1) The 2012 comparatives have been restated following the adoption of IAS 19 (Revised) 'Employee Benefits' (see Note 1)
Cash flow
|
Operating cash flow |
2013 £m |
2012 £m |
|
Operating profit |
215.5 |
228.4 |
|
Add back: depreciation and software amortisation |
21.6 |
20.6 |
|
Working capital and other movements |
(18.0) |
(6.3) |
|
Capital expenditure |
(31.7) |
(28.8) |
|
Operating cash flow |
187.4 |
213.9 |
|
Operating cash flow conversion(1) |
86% |
94% |
|
Non-operating cash flow |
|
|
|
Tax paid |
(64.1) |
(52.6) |
|
Net interest paid |
(9.4) |
(11.5) |
|
Dividends paid |
(47.7) |
(45.6) |
|
Acquisition of businesses, net of cash |
(16.9) |
(15.5) |
|
Acquisition-related costs |
(1.3) |
(0.7) |
|
Disposals |
106.0 |
- |
|
Exercise of share options |
0.3 |
0.5 |
|
Foreign exchange |
(4.3) |
13.6 |
|
Total non-operating cash flow |
(37.4) |
(111.8) |
|
Operating cash flow |
187.4 |
213.9 |
|
Movement in net debt |
150.0 |
102.1 |
(1) Operating cash flow as a % of operating profit, excluding Fusion
The year-end trade working capital to sales ratio increased to 12.7% from 11.3% in 2012. This increase was primarily due to phasing in the fourth quarter of the year which resulted in a higher level of trade receivables compared to 2012. Average trade working capital, expressed as a percentage of sales, increased to 11.5% (2012: 11.0%), a 0.5pp increase, of which 0.3pp arose due to foreign exchange and 0.2pp arose from growth in core working capital requirements, bringing the ratio back to more sustainable levels. Capital expenditure during the year equated to 2.6% of sales (2012: 2.4%) and, at £31.7 million (2012: £28.8 million), was 147% of depreciation and software amortisation (2012: 140%), due to on-going investments in infrastructure projects in Switzerland and the Netherlands, and a new ERP system for one of our operating companies in the USA.
Overall, net debt decreased by £150.0 million (2012: decrease of £102.1 million) from £254.1 million to £104.1 million. Interest costs, excluding the financing charge arising from IAS 19 (Revised), were covered by operating profit 24.1 times (2012: 17.9 times).
Financing and treasury
The group finances its operations from both retained earnings and third-party borrowings, with the majority of year-end net debt being at fixed rates of interest.
As at 31 December 2013, the group had £457 million of committed facilities denominated in different currencies, consisting of a five-year £46 million term loan maturing in September 2015, a five-year £332 million revolving credit facility maturing in August 2016, and a seven-year £79 million term loan maturing in October 2020. £311 million of the revolving credit facility was undrawn at the year end. In addition, the group had a cash balance of £44 million and other uncommitted facilities, mainly in the form of overdraft facilities at local operations.
At the year end, the group's borrowings amounted to £148 million, 84% of which was at fixed interest rates (2012: 48%). The ageing profile at the year end showed that 1% of year-end borrowings is due to mature within one year (2012: 32%), 31% between one and two years (2012: 0%), 14% between two and five years (2012: 68%) and 54% in greater than five years (2012: 0%).
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 debtor, trade creditor 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 (up to 75%) of the remaining forecast net transaction flows where there is reasonable certainty of an exposure. At 31 December 2013, approximately 57% of the estimated net euro, US dollar and Japanese yen exposures for 2014 were hedged using forward exchange contracts, mainly against the Swiss franc, sterling, the euro and the Danish krone.
The largest translational exposures are to the US dollar, euro, Danish krone and Swiss franc. Translational exposures are not hedged. The table below shows the key average exchange rates compared to sterling during 2013 and 2012.
|
|
2013 (average) |
2012 (average) |
|
USD |
1.56 |
1.58 |
|
EUR |
1.18 |
1.23 |
|
JPY |
153 |
126 |
To demonstrate the transaction and translation currency exposure faced by the group, the table below shows the differences between the group's consolidated revenues and costs for each of the major currencies in 2013 before reflecting the effect of transactional hedges taken out in the year.
Revenue and cost by major currency:
|
|
USD(1) |
EUR(1) |
GBP |
JPY |
Other |
Total |
|
Total sales (£m) |
480 |
437 |
70 |
59 |
152 |
1,198 |
|
% of sales |
40% |
36% |
6% |
5% |
13% |
100% |
|
Total costs (£m)(2) |
(360) |
(347) |
(103) |
(32) |
(150) |
(992) |
|
PBT by currency (£m) |
120 |
90 |
(33) |
27 |
2 |
206 |
|
% of PBT |
58% |
44% |
(16%) |
13% |
1% |
100% |
(1) Dollar/euro categories include tracking currencies
(2)Costs include interest of £3.9m in USD, £5.1m in EUR and £0.1m in GBP
The above table is for overall guidance only as the phasing of income and the movement in the monthly average exchange rates during the year can have a significant effect on the impact of foreign exchange.
Defined benefit pension schemes
The company operates a number of pension schemes throughout the group. The net pension liability in the balance sheet (before taking account of the related deferred tax asset of £2.2 million) has decreased to £8.2 million (2012: £11.4 million, restated following the adoption of IAS 19 (Revised) 'Employee Benefits' (see Note 1)). The movement can be summarised as follows:
|
|
£m |
|
Net deficit in defined benefit pension schemes at 31 December 2012 as previously reported |
(12.0) |
|
Impact of adopting IAS 19 (Revised) |
0.6 |
|
Net deficit at 31 December 2012, restated |
(11.4) |
|
Actuarial gains |
3.7 |
|
Contributions in excess of current service cost |
0.4 |
|
Scheme administration costs |
(0.4) |
|
Expected return on pension scheme assets net of interest costs on pension scheme liabilities |
(0.2) |
|
Exchange difference and other movements |
(0.3) |
|
Net deficit in defined benefit pension schemes at 31 December 2013 |
(8.2) |
|
|
|
The movement in individual plan deficits is shown in the table below:
|
£m |
UK |
Germany |
Netherlands |
Switzerland |
Total |
Net total |
|
Surplus/(deficit) as at |
3.9 |
(7.4) |
(1.5) |
(6.4) |
(15.3) |
(11.4) |
|
Increase/(decrease) in surplus/(deficit) |
3.3 |
0.2 |
(0.3) |
- |
(0.1) |
3.2 |
|
Surplus/(deficit) as at |
7.2 |
(7.2) |
(1.8) |
(6.4) |
(15.4) |
(8.2) |
(1) The opening balances have been restated following the adoption of IAS 19 (Revised) 'Employee Benefits' (see Note 1)
The UK plan surplus of £3.9 million at 31 December 2012 has increased to £7.2 million at
31 December 2013. This improvement is primarily due to favourable asset valuations which increased by £10.2 million during the year, compared to a £6.9 million increase in the present value of the liability. The net deficit for the overseas plans was largely unchanged compared to the prior year.
PRINCIPAL RISKS AND UNCERTAINTIES
The group has in place processes for identifying, evaluating and managing the key risks which could have an impact upon the group's performance.
The current risks, together with a description of how they relate to the group's strategy and the approach to managing them, are set out in the 2013 Annual Report which will be available on the group's website at www.spectris.com from 25 March 2014.
The group's audit and risk committee conducted its periodic risk review after the year end and concluded that the risks set out on pages 20-23 of the 2012 Annual Report and available at www.spectris.com continue to represent the current principal risks and uncertainties of the company.
The complete list of principal risks and uncertainties contained in the 2013 Annual Report can be summarised as follows:
- Acquisition integration
- New product development
- Competitive activity
- Supply chain disruption
- Fluctuations in exchange rates
- Intellectual property
- Political and economic environment
- Compliance with all relevant laws and regulations
- Information security
The potential impact of these risks on our strategy and financial performance and details of our specific mitigation actions are also detailed in the 2013 Annual Report.
Consolidated income statement
For the year ended 31 December 2013
|
|
|
2013
|
2012 Restated* |
|
|
|
Note |
£m |
£m |
|
|
Continuing operations |
|
|
|
|
|
Revenue |
3 |
1,202.0 |
1,230.8 |
|
|
Cost of sales |
|
(504.4) |
(518.0) |
|
|
Gross profit |
|
697.6 |
712.8 |
|
|
Indirect production and engineering expenses |
|
(96.9) |
(95.4) |
|
|
Sales and marketing expenses |
|
(268.0) |
(265.3) |
|
|
Administrative expenses |
|
(146.8) |
(156.1) |
|
|
Operating profit before acquisition-related items |
|
215.5 |
228.4 |
|
|
Net acquisition-related costs and fair value adjustments |
(0.7) |
(5.4) |
||
|
Amortisation of acquisition-related intangible assets |
|
(28.9) |
(27.0) |
|
|
Operating profit |
|
185.9 |
196.0 |
|
|
Profit on disposal of businesses |
8 |
98.3 |
- |
|
|
Financial income |
4 |
1.2 |
2.3 |
|
|
Finance costs |
4 |
(13.7) |
(13.1) |
|
|
Profit before tax |
|
271.7 |
185.2 |
|
|
Taxation - UK |
5 |
(4.2) |
(4.1) |
|
|
Taxation - Overseas |
5 |
(67.5) |
(40.9) |
|
|
Profit after tax for the year from continuing operations attributable to owners of the parent company |
200.0 |
140.2 |
||
|
Basic earnings per share |
7 |
169.2p |
119.7p |
|
|
Diluted earnings per share |
7 |
168.5p |
118.3p |
|
|
Interim dividends paid and final dividends proposed for the year (per share) |
6 |
42.75p |
39.00p |
|
|
Dividends paid during the year (per share) |
6 |
40.25p |
38.90p |
|
Spectris uses adjusted figures as key performance measures in addition to those reported under adopted IFRS. Reconciliations showing how the adjusted performance measures are derived from those reported under adopted IFRS are set out in Note 2.
*Details of the restatement are disclosed in Note 1.
Consolidated statement of comprehensive income
For the year ended 31 December 2013
|
|
|
2013 |
2012 |
|
|
Note |
£m |
£m |
|
Profit for the year attributable to owners of the parent company |
|
200.0 |
140.2 |
|
Other comprehensive income: Items that will not be reclassified to the consolidated income statement:
|
|
|
|
|
Remeasurement of net defined benefit liability, net of foreign exchange |
|
3.4 |
2.3 |
|
Tax on items above |
5 |
(0.9) |
(0.6) |
|
|
|
2.5 |
1.7 |
|
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 |
|
0.7 |
3.8 |
|
Foreign exchange movements on translation of overseas operations |
|
(8.5) |
(26.3) |
|
Currency translation differences transferred to profit on disposal of businesses |
|
(1.5) |
- |
|
Net gain on changes in fair value of effective portion of hedges of net investment in overseas operations |
|
- |
4.9 |
|
Tax on items above |
5 |
(0.1) |
(1.0) |
|
|
|
(9.4) |
(18.6) |
|
|
|
|
|
|
Total comprehensive income for the year attributable to the owners of the parent company |
|
193.1 |
123.3 |
Consolidated statement of changes in equity
For the year ended 31 December 2013
|
|
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 |
|
Balance at 1 January 2013 |
6.2 |
231.4 |
400.5 |
50.4 |
(0.8) |
3.1 |
0.3 |
691.1 |
|
Impact of change in accounting policy (see Note 1) |
- |
- |
0.5 |
- |
- |
- |
- |
0.5 |
|
Restated balance at 1 January 2013 |
6.2 |
231.4 |
401.0 |
50.4 |
(0.8) |
3.1 |
0.3 |
691.6 |
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
200.0 |
- |
- |
- |
- |
200.0 |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
Net gain on effective portion of changes in fair value of forward exchange contracts, net of tax |
- |
- |
- |
- |
0.6 |
- |
- |
0.6 |
|
Foreign exchange movements on translation of overseas operations |
- |
- |
- |
(8.5) |
- |
- |
- |
(8.5) |
|
Foreign exchange gain on disposal of businesses taken to income statement |
- |
- |
- |
(1.5) |
- |
- |
- |
(1.5) |
|
Remeasurement of net defined benefit liability , net of foreign exchange and tax |
- |
- |
2.5 |
- |
- |
- |
- |
2.5 |
|
Total comprehensive income for the year |
- |
- |
202.5 |
(10.0) |
0.6 |
- |
- |
193.1 |
|
Transactions with owners recorded directly in equity: |
|
|
|
|
|
|
|
|
|
Equity dividends paid by the company |
- |
- |
(47.7) |
- |
- |
- |
- |
(47.7) |
|
Share-based payments, net of tax |
- |
- |
6.8 |
- |
- |
- |
- |
6.8 |
|
Share options exercised from own shares (treasury) purchased |
- |
- |
0.3 |
- |
- |
- |
- |
0.3 |
|
Balance at 31 December 2013 |
6.2 |
231.4 |
562.9 |
40.4 |
(0.2) |
3.1 |
0.3 |
844.1 |
For the year ended 31 December 2012 - Restated
|
|
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 |
|
Balance at 1 January 2012, as previously reported |
|
6.2 |
231.4 |
295.0 |
71.8 |
(3.6) |
3.1 |
0.3 |
604.2 |
|
Impact of change in accounting policy (See Note 1) |
|
- |
- |
(0.6) |
- |
- |
- |
- |
(0.6) |
|
Restated balance at 1 January 2012 |
|
6.2 |
231.4 |
294.4 |
71.8 |
(3.6) |
3.1 |
0.3 |
603.6 |
|
Profit for the year |
- |
- |
140.2 |
- |
- |
- |
- |
140.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
Net gain on effective portion of changes in fair value of forward exchange contracts, net of tax |
- |
- |
- |
- |
2.8 |
- |
- |
2.8 |
|
|
Foreign exchange movements on translation of overseas operations |
- |
- |
- |
(26.3) |
- |
- |
- |
(26.3) |
|
|
Net gain on changes in fair value of effective portion of hedges of net investment in overseas operations, net of tax |
- |
- |
- |
4.9 |
- |
- |
- |
4.9 |
|
|
Remeasurement of net defined benefit liability, net of foreign exchange and tax |
- |
- |
1.7 |
- |
- |
- |
- |
1.7 |
|
|
Total comprehensive income for the year |
- |
- |
141.9 |
(21.4) |
2.8 |
- |
- |
123.3 |
|
|
Transactions with owners recorded directly in equity: |
|
|
|
|
|
|
|
|
|
|
Equity dividends paid by the company |
|
- |
- |
(45.6) |
- |
- |
- |
- |
(45.6) |
|
Share-based payments, net of tax |
|
- |
- |
9.8 |
- |
- |
- |
- |
9.8 |
|
Share options exercised from own shares (treasury) purchased |
|
- |
- |
0.5 |
- |
- |
- |
- |
0.5 |
|
Balance at 31 December 2012 |
|
6.2 |
231.4 |
401.0 |
50.4 |
(0.8) |
3.1 |
0.3 |
691.6 |
Consolidated statement of financial position
As at 31 December 2013
|
|
2013 |
2012 Restated |
|
|
£m |
£m |
|
ASSETS |
|
|
|
Non-current assets |
|
|
|
Intangible assets: |
|
|
|
Goodwill |
521.0 |
526.7 |
|
Other intangible assets |
177.5 |
191.5 |
|
|
698.5 |
718.2 |
|
Property, plant and equipment |
159.0 |
152.5 |
|
Equity-accounted investments |
- |
0.6 |
|
Deferred tax assets |
17.0 |
16.8 |
|
Retirement benefit assets |
7.2 |
3.9 |
|
|
881.7 |
892.0 |
|
Current assets |
|
|
|
Inventories |
162.0 |
163.8 |
|
Taxation recoverable |
1.9 |
6.2 |
|
Trade and other receivables |
215.8 |
208.8 |
|
Derivative financial instruments |
3.6 |
2.4 |
|
Cash and cash equivalents |
43.8 |
40.8 |
|
|
427.1 |
422.0 |
|
Assets held for sale |
- |
17.6 |
|
|
427.1 |
439.6 |
|
Total assets |
1,308.8 |
1,331.6 |
|
LIABILITIES |
|
|
|
Current liabilities |
|
|
|
Short-term borrowings |
(2.2) |
(82.8) |
|
Derivative financial instruments |
- |
(12.5) |
|
Trade and other payables |
(194.0) |
(207.9) |
|
Current tax liabilities |
(32.6) |
(29.7) |
|
Provisions |
(21.0) |
(26.4) |
|
|
(249.8) |
(359.3) |
|
Liabilities held for sale |
- |
(9.2) |
|
|
(249.8) |
(368.5) |
|
Net current assets |
177.3 |
71.1 |
|
Non-current liabilities |
|
|
|
Medium- and long-term borrowings |
(145.7) |
(200.3) |
|
Other payables |
(14.8) |
(19.7) |
|
Retirement benefit obligations |
(15.4) |
(15.3) |
|
Deferred tax liabilities |
(39.0) |
(36.2) |
|
|
(214.9) |
(271.5) |
|
Total liabilities |
(464.7) |
(640.0) |
|
Net assets |
844.1 |
691.6 |
|
|
|
|
|
EQUITY |
|
|
|
Share capital |
6.2 |
6.2 |
|
Share premium |
231.4 |
231.4 |
|
Retained earnings |
562.9 |
401.0 |
|
Translation reserve |
40.4 |
50.4 |
|
Hedging reserve |
(0.2) |
(0.8) |
|
Merger reserve |
3.1 |
3.1 |
|
Capital redemption reserve |
0.3 |
0.3 |
|
Total equity attributable to equity holders of the parent company |
844.1 |
691.6 |
|
Total equity and liabilities |
1,308.8 |
1,331.6 |
Consolidated statement of cash flows
For the year ended 31 December 2013
|
|
|
2013
|
2012 Restated |
|
|
Note |
£m |
£m |
|
Cash flows from operating activities |
|
|
|
|
Profit after tax |
|
200.0 |
140.2 |
|
Adjustments for: |
|
|
|
|
Tax |
5 |
71.7 |
45.0 |
|
Profit on disposal of businesses |
|
(98.3) |
- |
|
Finance costs |
4 |
13.7 |
13.1 |
|
Financial income |
4 |
(1.2) |
(2.3) |
|
Depreciation |
|
18.1 |
17.5 |
|
Amortisation of intangible assets |
|
32.4 |
30.1 |
|
Acquisition-related fair value adjustments |
|
(0.4) |
4.5 |
|
Loss/(gain) on sale of property, plant and equipment |
|
0.2 |
(0.1) |
|
Acquisition costs not yet paid |
|
- |
0.2 |
|
Equity-settled share-based payment transactions |
|
2.3 |
6.2 |
|
Operating cash flow before changes in working capital and provisions |
|
238.5 |
254.4 |
|
Increase in trade and other receivables |
|
(6.1) |
(1.2) |
|
Decrease/(increase) in inventories |
|
0.7 |
(1.7) |
|
Decrease in trade and other payables |
|
(11.5) |
(5.5) |
|
Decrease in provisions and employee benefits |
|
(5.2) |
(6.2) |
|
Income tax paid |
|
(64.1) |
(52.6) |
|
Net cash flow generated from operating activities |
|
152.3 |
187.2 |
|
Cash flows from investing activities |
|
|
|
|
Purchase of property, plant and equipment and software |
|
(31.7) |
(28.8) |
|
Proceeds from sale of property, plant and equipment |
|
1.4 |
2.2 |
|
Acquisition of businesses, net of cash acquired |
|
(16.9) |
(15.5) |
|
Proceeds from disposal of businesses |
8 |
106.0 |
- |
|
Interest received |
|
0.3 |
0.5 |
|
Net cash flows generated from/(used in) investing activities |
|
59.1 |
(41.6) |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Interest paid |
|
(9.7) |
(12.0) |
|
Dividends paid |
6 |
(47.7) |
(45.6) |
|
Proceeds from exercise of share options (treasury shares) |
|
0.3 |
0.5 |
|
Proceeds from borrowings |
|
80.4 |
- |
|
Repayment of borrowings |
|
(233.8) |
(87.1) |
|
Net cash flows used in financing activities |
|
(210.5) |
(144.2) |
|
Net increase in cash and cash equivalents |
|
0.9 |
1.4 |
|
Cash and cash equivalents at beginning of year |
|
39.8 |
40.5 |
|
Effect of foreign exchange rate changes |
|
0.9 |
(2.1) |
|
Cash and cash equivalents at end of year |
|
41.6 |
39.8 |
Reconciliation of changes in cash and cash equivalents to movements in net debt
|
|
|
2013
|
2012 Restated |
|
|
|
£m |
£m |
|
Net increase in cash and cash equivalents |
|
0.9 |
1.4 |
|
Proceeds from borrowings |
|
(80.4) |
- |
|
Repayment of borrowings |
|
233.8 |
87.1 |
|
Effect of foreign exchange rate changes |
|
(4.3) |
13.6 |
|
Movement in net debt |
|
150.0 |
102.1 |
|
Net debt at start of year |
|
(254.1) |
(356.2) |
|
Net debt at end of year |
|
(104.1) |
(254.1) |
Notes to the accounts
1. Principal accounting policies and basis of preparation
The financial information presented in the preliminary announcement for the year ended 31 December 2013 is based on, and is consistent with, that in the group's audited financial statements for the year ended 31 December 2013.
Basis of accounting
The preliminary announcement has been prepared and approved by the directors on a historical cost basis modified by the revaluation of financial assets and derivatives held at fair value. The consolidated financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB, as adopted by the European Union (adopted IFRS) , and in accordance with the provisions of the Companies Act 2006.
The preliminary announcement has been prepared using consistent accounting policies, except for the adoption of new accounting standards and interpretations noted below. No revisions to adopted IFRS that became applicable in 2013 had a significant impact on the group's financial statements.
The preliminary announcement is presented in millions of pounds sterling rounded to the nearest one decimal place.
Basis of consolidation
The preliminary announcement sets out the group's financial position as at 31 December 2013 and the group's financial performance for the year ended 31 December 2013.
Subsidiaries are those entities controlled by the group. Control exists when the group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Subsidiaries are consolidated from the date on which control is transferred to the group and cease to be consolidated from the date on which control is transferred out of the group. Associates are accounted for using the equity method of accounting and are recognised at cost.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated in the same way as unrealised gains except that they are only eliminated to the extent that there is no evidence of impairment.
Going concern
The group's net debt balance at 31 December 2013 was £104.1m (2012: £254.1m), with available undrawn committed borrowing facilities of £311.0m (2012: £184.6m).
The Board has reviewed sensitivity analysis on the group's forecasts to 30 June 2015, the maturity profile of its financial facilities and liabilities and the ability of the group to refinance these obligations as they fall due. The principal liquidity and solvency risk is mitigated through its financial risk management policies. For the foreseeable future the Board has a high level of confidence that the group will have the necessary liquid resources to meet its liabilities as they fall due and will be able to sustain its business model, strategy and operations and remain solvent, including the impact of reasonable scenarios. For this reason, it continues to adopt the going concern basis in preparing the group's financial statements. There are no key sensitivities identified in relation to this conclusion.
Change in accounting policies
Amendments to IAS 19 'Employee Benefits': the principal change is that the financing on post-retirement benefits is calculated on the net surplus or deficit using an 'AA' corporate bond rate. In addition, it will not be permissible to recognise administrative expenses relating directly to the administration of defined benefit pension schemes as a deduction to the expected return on scheme assets within net finance costs, with the costs instead being recognised as administrative expenses in the consolidated income statement.
The following tables summarise the effect of the adoption of IAS 19 (Revised) on the group's consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position and consolidated statement of cash flows for the year ended 31 December 2012.
|
|
|
2012 |
|
Impact on consolidated income statement |
|
£m |
|
Administrative expenses |
|
(0.5) |
|
Finance income |
|
(1.0) |
|
Tax credit |
|
0.4 |
|
Overall decrease in profit after tax for the year |
|
(1.1) |
|
|
|
|
|
Impact on consolidated statement of comprehensive income |
|
£m |
|
Profit for the year attributable to owners of the parent company |
|
(1.1) |
|
Remeasurement of the defined benefit liability/(asset), net of foreign exchange |
|
2.7 |
|
Tax charge on items that will not be reclassified to income statement |
|
(0.5) |
|
Overall increase in other comprehensive income |
|
1.1 |
|
|
|
|
|
Impact on consolidated statement of financial position |
|
£m |
|
Deferred tax asset |
|
(0.1) |
|
Retirement benefit obligations |
|
0.6 |
|
Overall increase in retained earnings |
|
0.5 |
|
|
|
|
|
Impact on consolidated statement of cash flows |
|
£m |
|
Profit after tax |
|
(1.1) |
|
Tax credit |
|
(0.4) |
|
Financial income |
|
1.0 |
|
Increase in provisions and employee benefits |
|
0.5 |
|
Overall impact on cash flow |
|
- |
If IAS 19 (Revised) had not been adopted, the impact on the results for 2013 would have been an increase in profit after tax for the year of £1.3m with the corresponding reduction in other comprehensive income. Basic and diluted earnings per share for 2013 would have been 1.1 pence higher.
Significant accounting judgements and estimates
In preparing the group's financial statements, management has made judgements, estimates and assumptions that affect the application of the group's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and assumptions are reviewed on an on-going basis and are based on historical experience and various other factors that are believed to be reasonable under the circumstances.
Key judgements made in respect of the appropriateness of the group accounting policies relate to:
• Defined benefit pension obligations. The defined benefit pension obligations are calculated using a number of assumptions, including future inflation, salary increases and mortality and the obligation is then discounted to its present value using an assumed discount rate;
• Impairment of goodwill. The carrying amount of goodwill has been tested for impairment by estimating the value in use of the cash-generating units to which it has been allocated;
• Provisions against inventory. Judgement is applied to assess the level of provisions required to write down slow-moving, excess and obsolete inventory to their net realisable value:
• Provisions for impairment of trade receivables. Judgement is applied to assess whether a trade receivable is recoverable or not, and whether the level of provision required to write down the value of the receivable to its recoverable amount is appropriate:
• Provisions and contingent liabilities in relation to determining the risk adjusted probability, quantum and timing of management's best estimate of future payments;
• Deferred tax. The recognition of deferred tax assets is dependent on assessments of future taxable income in the relevant countries concerned; and
• Business combinations in relation to the determination of the provisional fair value of acquired assets and liabilities at the date of acquisition.
The financial statements were approved by the Board of Directors on 27 February 2014.
2. Adjusted performance measures
Spectris plc uses adjusted figures as key performance measures in addition to those reported under adopted IFRS, as management believe these measures enable them to assess the underlying trading performance of the businesses. Adjusted figures exclude certain non-operational items which management has defined as amortisation and impairment of acquisition-related intangible assets, acquisition-related costs and contingent consideration fair value adjustments, acquisition-related fair value adjustments, profits or losses on termination or disposal of businesses, unrealised changes in the fair value of financial instruments, gains or losses on retranslation of short-term intercompany loan balances, related tax effects and other tax items which do not form part of the underlying tax rate (see Note 5). In addition, all income statement and operating cash flow figures have been restated to exclude the trading results and impact of the disposal of Fusion UV business which was disposed of on 31 January 2013.
The adjusted performance measures are derived from the reported figures under adopted IFRS as follows:
|
|
2013 |
2012 |
|||
|
Sales |
£m |
£m |
|||
|
Sales as reported under adopted IFRS |
1,202.0 |
1,230.8 |
|||
|
Divested businesses |
(4.2) |
(53.6) |
|||
|
Sales excluding divested businesses |
1,197.8 |
1,177.2 |
|||
|
|
|
|
|
|
|
|
Sales by segment |
Materials Analysis £m |
Test and Measurement £m |
In-line Instrumentation £m |
Industrial Controls £m |
2013 Total £m |
|
Sales as reported under adopted IFRS |
362.4 |
348.7 |
269.9 |
221.0 |
1,202.0 |
|
Divested businesses |
- |
- |
(4.2) |
- |
(4.2) |
|
Sales excluding divested businesses |
362.4 |
348.7 |
265.7 |
221.0 |
1,197.8 |
|
Sales by segment |
Materials Analysis £m |
Test and Measurement £m |
In-line Instrumentation £m |
Industrial Controls £m |
2012 Total £m |
|
Sales as reported under adopted IFRS |
348.1 |
345.4 |
320.1 |
217.2 |
1,230.8 |
|
Divested businesses |
- |
- |
(53.6) |
- |
(53.6) |
|
Sales excluding divested businesses |
348.1 |
345.4 |
266.5 |
217.2 |
1,177.2 |
|
The following is an analysis of revenue by geographical destination: |
||
|
|
2013 |
2012 |
|
|
£m |
£m |
|
UK |
39.9 |
38.0 |
|
Germany |
125.4 |
118.6 |
|
France |
46.3 |
42.2 |
|
Rest of Europe |
177.8 |
169.1 |
|
USA |
336.9 |
337.0 |
|
Rest of North America |
36.3 |
39.4 |
|
Japan |
61.3 |
76.2 |
|
China |
159.5 |
150.3 |
|
South Korea |
33.7 |
33.6 |
|
Rest of Asia Pacific |
100.9 |
97.5 |
|
Rest of the world |
79.8 |
75.3 |
|
|
1,197.8 |
1,177.2 |
|
|
2013
|
2012 Restated |
|
Adjusted operating profit |
£m |
£m |
|
Operating profit as reported under adopted IFRS |
185.9 |
196.0 |
|
Net acquisition-related costs and fair value adjustments |
0.7 |
5.4 |
|
Amortisation of acquisition-related intangible assets |
28.9 |
27.0 |
|
Adjusted operating profit |
215.5 |
228.4 |
|
Divested businesses |
(0.8) |
(11.5) |
|
Adjusted operating profit excluding divested businesses |
214.7 |
216.9 |
|
|
Materials Analysis |
Test and Measurement |
In-line Instrumentation |
Industrial Controls |
2013 Total |
|
Adjusted operating profit by segment - 2013 |
£m |
£m |
£m |
£m |
£m |
|
Operating profit as reported under adopted IFRS |
54.7 |
49.4 |
49.3 |
32.5 |
185.9 |
|
Net acquisition-related costs and fair value adjustments |
0.3 |
- |
- |
0.4 |
0.7 |
|
Amortisation of acquisition-related intangible assets |
8.3 |
5.4 |
2.7 |
12.5 |
28.9 |
|
Adjusted operating profit: segment result |
63.3 |
54.8 |
52.0 |
45.4 |
215.5 |
|
Divested businesses |
- |
- |
(0.8) |
- |
(0.8) |
|
Adjusted operating profit excluding divested businesses: segment result |
63.3 |
54.8 |
51.2 |
45.4 |
214.7 |
|
|
Materials Analysis |
Test and Measurement |
In-line Instrumentation |
Industrial Controls |
2012 Total |
|
Adjusted operating profit by segment - 2012 restated |
£m
|
£m
|
£m
|
£m
|
£m
|
|
Operating profit as reported under adopted IFRS |
56.9 |
50.1 |
60.6 |
28.4 |
196.0 |
|
Net acquisition-related costs and fair value adjustments |
0.1 |
0.1 |
0.5 |
4.7 |
5.4 |
|
Amortisation of acquisition-related intangible assets |
6.0 |
5.2 |
2.7 |
13.1 |
27.0 |
|
Adjusted operating profit: segment result |
63.0 |
55.4 |
63.8 |
46.2 |
228.4 |
|
Divested businesses |
- |
- |
(11.5) |
- |
(11.5) |
|
Adjusted operating profit excluding divested businesses: segment result |
63.0 |
55.4 |
52.3 |
46.2 |
216.9 |
Net acquisition-related costs and fair value adjustments comprises of acquisition costs of £1.1m (2012: £0.9m) that have been recognised in the consolidated income statement under IFRS 3 (Revised) 'Business Combinations', fair value adjustments to inventory of £0.1m (2012: £4.5m) and other fair value adjustments resulting in a credit of £0.5m (2012: £nil). Net acquisition-related costs and fair value adjustments are included within administrative expenses. Acquisition-related costs have been excluded from the adjusted operating profit and acquisition costs paid of £1.3m have been excluded from adjusted operating cash flow.
|
Return on sales by segment - 2013 |
Materials Analysis |
Test and Measurement |
In-line Instrumentation |
Industrial Controls |
2013 Total |
|
Using operating profit as reported under adopted IFRS |
15.1% |
14.2% |
18.3% |
14.7% |
15.5% |
|
Using adjusted operating profit |
17.5% |
15.7% |
19.3% |
20.6% |
17.9% |
|
Using adjusted operating profit excluding divested businesses |
17.5% |
15.7% |
19.3% |
20.6% |
17.9% |
|
Return on sales by segment - 2012 restated |
Materials Analysis |
Test and Measurement |
In-line Instrumentation |
Industrial Controls |
2012 Total |
|
Using operating profit as reported under adopted IFRS |
16.3% |
14.5% |
18.9% |
13.1% |
15.9% |
|
Using adjusted operating profit |
18.1% |
16.0% |
19.9% |
21.3% |
18.6% |
|
Using adjusted operating profit excluding divested businesses |
18.1% |
16.0% |
19.6% |
21.3% |
18.4% |
|
Reconciliation to adjusted profit before tax and adjusted operating profit |
|
2013
|
2012 Restated |
|
Note |
£m |
£m |
|
|
Profit before tax as reported under adopted IFRS |
|
271.7 |
185.2 |
|
Add/(deduct): |
|
|
|
|
Net acquisition-related costs and fair value adjustments |
|
0.7 |
5.4 |
|
Amortisation of acquisition-related intangible assets |
|
28.9 |
27.0 |
|
Profit on disposal of businesses |
|
(98.3) |
- |
|
Increase in fair value of cross-currency interest rate swaps |
4 |
(0.7) |
(0.9) |
|
Net loss/(gain) on retranslation of short-term intercompany loan balances |
4 |
4.1 |
(0.9) |
|
Adjusted profit before tax |
|
206.4 |
215.8 |
|
Divested businesses |
|
(0.8) |
(11.5) |
|
Adjusted operating profit before tax excluding divested businesses |
|
205.6 |
204.3 |
|
Adjusted net finance costs (see below) |
|
9.1 |
12.6 |
|
Adjusted operating profit excluding divested businesses |
|
214.7 |
216.9 |
|
|
|
|
|
|
|
|
2013
|
2012 Restated |
|
Adjusted net finance costs |
|
£m |
£m |
|
Net interest costs as reported under adopted IFRS |
|
(12.5) |
(10.8) |
|
Increase in fair value of cross-currency interest rate swaps |
|
(0.7) |
(0.9) |
|
Net loss /(gain) on retranslation of short-term intercompany loan balances |
|
4.1 |
(0.9) |
|
Adjusted net finance costs |
|
(9.1) |
(12.6) |
|
Divested businesses |
|
- |
- |
|
Adjusted net finance costs excluding divested businesses |
|
(9.1) |
(12.6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
2012 |
|
Adjusted operating cash flow |
|
£m |
£m |
|
Net cash from operating activities under adopted IFRS |
|
152.3 |
187.2 |
|
Acquisition-related costs paid |
|
1.3 |
0.7 |
|
Net income taxes paid |
|
64.1 |
52.6 |
|
Purchase of property, plant and equipment and software |
|
(31.7) |
(28.8) |
|
Proceeds from sale of property, plant and equipment |
|
1.4 |
2.2 |
|
Adjusted operating cash flow |
|
187.4 |
213.9 |
|
Divested businesses |
|
(2.6) |
(9.1) |
|
Adjusted operating cash flow excluding divested businesses |
|
184.8 |
204.8 |
|
|
2013
|
2012 Restated |
|
Adjusted earnings per share |
£m |
£m |
|
Profit after tax as reported under adopted IFRS |
200.0 |
140.2 |
|
Adjusted for: |
|
|
|
Net acquisition-related costs and fair value adjustments |
0.7 |
5.4 |
|
Amortisation of acquisition-related intangible assets |
28.9 |
27.0 |
|
Profit on disposal of businesses |
(98.3) |
- |
|
Increase in fair value of cross-currency interest rate swaps |
(0.7) |
(0.9) |
|
Net loss/(gain) on retranslation of short-term inter-company loan balances |
4.1 |
(0.9) |
|
Tax effect of the above and other non-recurring items |
22.8 |
(10.8) |
|
Adjusted earnings |
157.5 |
160.0 |
|
Profit after tax on divested businesses |
(0.5) |
(7.4) |
|
Adjusted earnings excluding divested businesses |
157.0 |
152.6 |
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding (millions) |
118.2 |
117.1 |
|
Adjusted earnings per share (pence) |
133.3 |
136.6 |
|
Adjusted earnings per share excluding divested businesses (pence) |
132.9 |
130.3 |
|
Adjusted diluted earnings per share |
2013
|
2012 Restated |
|
Diluted weighted average number of shares outstanding (millions) |
118.7 |
118.5 |
|
Adjusted diluted earnings per share (pence) |
132.7 |
135.0 |
|
Adjusted diluted earnings per share excluding divested businesses (pence) |
132.3 |
128.8 |
Basic and diluted earnings per share in accordance with IAS 33 'Earnings Per Share' are disclosed in Note 7.
|
|
2013 |
2012 |
|
Analysis of net debt for management purposes |
£m |
£m |
|
Bank overdrafts |
2.2 |
1.0 |
|
Bank loans - unsecured |
145.7 |
200.3 |
|
Unsecured loan notes |
- |
81.8 |
|
Cross-currency interest rate swaps - currency portion |
- |
11.8 |
|
Total borrowings |
147.9 |
294.9 |
|
Cash balances |
(43.8) |
(40.8) |
|
Net debt |
104.1 |
254.1 |
3. Operating Segments
The group has four reportable segments, as described below, which are the group's strategic business units. These units offer different applications, assist companies at various stages of the production cycle and are focused towards specific industries. These segments reflect the internal reporting provided to the Chief Operating Decision Maker (considered to be the Board) on a regular basis and to assist in making decision on resources to be allocated to each segment and assess performance. The segment results include an allocation of head office costs. The following summary describes the operations in each of the group's reportable segments:
- Materials Analysis provides products that enable customers to determine structure, composition, quantity and quality of particles and materials, during their R&D processes, when assessing raw materials before production, or during the manufacturing process. Key customers are leaders in academic research, mining, cement, pharmaceutical, chemical and electronics industries.
- Test and Measurement supplies test, measurement and analysis equipment and software for product design optimisation, manufacturing control, and environmental monitoring systems. Markets are principally the aerospace, automotive and consumer electronics industries.
- In-line Instrumentation provides process analytical measurement, asset monitoring and on-line controls for both primary processing and the converting industries. Key customers are in the electronics, petrochemicals, oil and gas, pulp and paper, energy, manufacturing, automotive, and medical industries.
- Industrial Controls provides products and solutions that measure, monitor, control, inform, track, and trace during the production process. Key customers include industrial manufacturing, automotive, electronics, packaging, and life sciences.
|
Information about reportable segments |
Materials Analysis |
Test and Measurement |
In-line Instrumentation |
Industrial Controls |
2013 Total |
|
|
£m |
£m |
£m |
£m |
£m |
|
Segment revenues |
362.6 |
349.2 |
270.0 |
221.5 |
1,203.3 |
|
Inter-segment revenue |
(0.2) |
(0.5) |
(0.1) |
(0.5) |
(1.3) |
|
External revenue |
362.4 |
348.7 |
269.9 |
221.0 |
1,202.0 |
|
Reportable segment profit for continuing operations |
63.3 |
54.8 |
52.0 |
45.4 |
215.5 |
|
Net acquisition-related costs and fair value adjustments |
(0.3) |
- |
- |
(0.4) |
(0.7) |
|
Amortisation of acquisition-related intangibles |
(8.3) |
(5.4) |
(2.7) |
(12.5) |
(28.9) |
|
Operating profit |
54.7 |
49.4 |
49.3 |
32.5 |
185.9 |
|
Profit on disposal of businesses* |
|
|
|
|
98.3 |
|
Financial income* |
|
|
|
|
1.2 |
|
Finance costs* |
|
|
|
|
(13.7) |
|
Profit before tax |
|
|
|
|
271.7 |
|
Tax* |
|
|
|
|
(71.7) |
|
Profit after tax |
|
|
|
|
200.0 |
|
|
Materials Analysis |
Test and Measurement |
In-line Instrumentation |
Industrial Controls |
2012 Restated Total |
|
|
£m |
£m |
£m |
£m |
£m |
|
Segment revenues |
347.8 |
345.8 |
320.4 |
217.8 |
1,231.8 |
|
Inter-segment revenue |
0.3 |
(0.4) |
(0.3) |
(0.6) |
(1.0) |
|
External revenue |
348.1 |
345.4 |
320.1 |
217.2 |
1,230.8 |
|
|
|
|
|
|
|
|
Reportable segment profit for continuing operations |
63.0 |
55.4 |
63.8 |
46.2 |
228.4 |
|
Net acquisition-related costs and fair value adjustments |
(0.1) |
(0.1) |
(0.5) |
(4.7) |
(5.4) |
|
Amortisation of acquisition-related intangibles |
(6.0) |
(5.2) |
(2.7) |
(13.1) |
(27.0) |
|
Operating profit |
56.9 |
50.1 |
60.6 |
28.4 |
196.0 |
|
Financial income* |
|
|
|
|
2.3 |
|
Finance costs* |
|
|
|
|
(13.1) |
|
Profit before tax |
|
|
|
|
185.2 |
|
Tax* |
|
|
|
|
(45.0) |
|
Profit after tax |
|
|
|
|
140.2 |
* Not allocated to reportable segments in reporting to the chief operating decision maker.
Reportable segment profit is consistent with that presented to the chief operating decision maker. Inter-segment pricing is on an arm's length basis. Segments are presented on the basis of actual inter-segment charges made.
|
|
Carrying amount of segment assets
|
Carrying amount of segment liabilities
|
||
|
|
2013
|
2012 Restated |
2013
|
2012 Restated |
|
|
£m |
£m |
£m |
£m |
|
Materials Analysis |
304.2 |
299.2 |
(92.2) |
(115.8) |
|
Test and Measurement |
321.6 |
329.9 |
(75.8) |
(78.2) |
|
In-line Instrumentation |
214.3 |
226.2 |
(42.0) |
(46.7) |
|
Industrial Controls |
395.2 |
404.6 |
(19.8) |
(19.4) |
|
Total segment assets and liabilities |
1,235.3 |
1,259.9 |
(229.8) |
(260.1) |
|
Cash and borrowings |
43.8 |
40.8 |
(147.9) |
(283.1) |
|
Derivative financial instruments |
3.6 |
2.4 |
- |
(12.5) |
|
Pension asset/(liability) |
7.2 |
3.9 |
(15.4) |
(15.3) |
|
Taxation (including amounts disclosed within assets and liabilities held for sale) |
18.9 |
24.6 |
(71.6) |
(69.0) |
|
Consolidated total assets and liabilities |
1,308.8 |
1,331.6 |
(464.7) |
(640.0) |
Segment assets comprise: goodwill, other intangible assets, property, plant and equipment, inventories, trade and other receivables. Segment liabilities comprise: trade and other payables, provisions and other payables, which can be reasonably attributed to the reported operating segments. Unallocated items represent current and deferred taxation balances, defined benefit scheme liabilities and all components of net debt.
|
|
Additions to non-current assets |
Depreciation and amortisation |
||
|
|
2013 |
2012 |
2013 |
2012 |
|
|
£m |
£m |
£m |
£m |
|
Materials Analysis |
6.6 |
31.9 |
13.6 |
10.7 |
|
Test and Measurement |
8.8 |
8.9 |
13.4 |
12.6 |
|
In-line Instrumentation |
22.2 |
9.7 |
7.7 |
8.2 |
|
Industrial Controls |
8.1 |
(2.9) |
15.8 |
16.1 |
|
|
45.7 |
47.6 |
50.5 |
47.6 |
|
Geographical segments |
|
The group's operating segments are each located in several geographical locations and sell on to external customers in all parts of the world.
|
|
No individual country amounts to more than 3% of turnover, other than those noted below.
The following is an analysis of revenue by geographical destination. |
|
|
Materials Analysis |
Test and Measurement |
In-line Instrumentation |
Industrial Controls |
|
|
|
2013 |
||||
|
|
Total |
||||
|
|
£m |
£m |
£m |
£m |
£m |
|
UK |
11.8 |
13.4 |
7.5 |
7.2 |
39.9 |
|
Germany |
26.1 |
61.9 |
26.7 |
10.8 |
125.5 |
|
France |
12.6 |
22.6 |
9.0 |
2.1 |
46.3 |
|
Rest of Europe |
60.0 |
64.0 |
44.8 |
9.2 |
178.0 |
|
USA |
63.6 |
59.7 |
64.9 |
149.9 |
338.1 |
|
Rest of North America |
11.1 |
4.3 |
7.5 |
13.5 |
36.4 |
|
Japan |
24.1 |
22.8 |
14.2 |
1.3 |
62.4 |
|
China |
57.2 |
45.0 |
47.0 |
10.9 |
160.1 |
|
South Korea |
11.8 |
13.0 |
5.3 |
3.8 |
33.9 |
|
Rest of Asia Pacific |
48.0 |
21.4 |
23.5 |
8.7 |
101.6 |
|
Rest of the world |
36.1 |
20.6 |
19.5 |
3.6 |
79.8 |
|
|
362.4 |
348.7 |
269.9 |
221.0 |
1,202.0 |
|
|
Materials Analysis |
Test and Measurement |
In-line Instrumentation |
Industrial Controls |
2012 |
|
|
Total |
||||
|
|
£m |
£m |
£m |
£m |
£m |
|
UK |
11.5 |
11.9 |
8.3 |
6.9 |
38.6 |
|
Germany |
23.1 |
61.1 |
24.1 |
11.1 |
119.4 |
|
France |
11.0 |
20.4 |
8.5 |
2.3 |
42.2 |
|
Rest of Europe |
54.3 |
58.2 |
50.3 |
8.7 |
171.5 |
|
USA |
62.2 |
62.6 |
77.1 |
147.8 |
349.7 |
|
Rest of North America |
13.6 |
5.5 |
7.5 |
13.6 |
40.2 |
|
Japan |
29.9 |
28.8 |
32.3 |
1.4 |
92.4 |
|
China |
49.1 |
45.7 |
58.2 |
9.6 |
162.6 |
|
South Korea |
10.9 |
12.8 |
10.0 |
3.9 |
37.6 |
|
Rest of Asia Pacific |
49.0 |
20.4 |
22.3 |
8.5 |
100.2 |
|
Rest of the world |
33.5 |
18.0 |
21.5 |
3.4 |
76.4 |
|
|
348.1 |
345.4 |
320.1 |
217.2 |
1,230.8 |
|
|
||
|
The following is an analysis of the carrying amount of non-current segment assets, analysed by the geographical area in which the assets are located. |
||
|
|
Non-current assets
|
|
|
|
2013
|
2012 Restated |
|
|
£m |
£m |
|
UK |
89.8 |
81.7 |
|
Germany |
27.7 |
26.7 |
|
France |
0.1 |
0.2 |
|
Rest of Europe* |
291.8 |
283.7 |
|
USA |
397.5 |
420.3 |
|
Rest of North America |
5.3 |
5.7 |
|
Japan |
1.4 |
1.7 |
|
China |
7.1 |
7.4 |
|
South Korea |
0.3 |
0.2 |
|
Rest of Asia Pacific |
30.6 |
38.0 |
|
Rest of the world |
5.9 |
5.7 |
|
|
857.5 |
871.3 |
|
Retirement benefit assets ** |
7.2 |
3.9 |
|
Deferred taxation ** |
17.0 |
16.8 |
|
Total non-current assets |
881.7 |
892.0 |
* Principally in Denmark and Switzerland
** Not allocated to reportable geographic area in reporting to the chief operating decision maker
4. Finance costs and financial income
|
|
2013
|
2012 Restated |
|
Financial income |
£m |
£m |
|
Interest receivable |
0.5 |
0.5 |
|
Increase in fair value of cross-currency interest rate swaps |
0.7 |
0.9 |
|
Net gains on retranslation of short-term inter-company loan balances |
- |
0.9 |
|
|
1.2 |
2.3 |
|
|
2013
|
2012 Restated |
|
Finance costs |
£m |
£m |
|
Interest payable on loans and overdrafts |
9.1 |
12.6 |
|
Net losses on retranslation of short-term intercompany loan balances |
4.1 |
- |
|
Net interest cost on pension scheme liabilities |
0.2 |
0.5 |
|
Other finance costs |
0.3 |
- |
|
|
13.7 |
13.1 |
Net interest costs of £8.6m (2012: £12.1m) for the purposes of the calculation of interest cover comprise of bank interest receivable of £0.5m (2012: £0.5m), and interest payable on loans and overdrafts of £9.1m (2012: £12.6m).
5. Taxation
|
|
UK |
Overseas |
2013 Total |
UK Restated |
Overseas Restated |
2012 Restated |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Current tax charge |
5.4 |
70.1 |
75.5 |
5.0 |
44.2 |
49.2 |
|
Adjustments in respect of current tax of prior years |
(1.3) |
(3.0) |
(4.3) |
(0.3) |
(2.7) |
(3.0) |
|
Deferred tax - origination and reversal of temporary differences |
0.1 |
0.4 |
0.5 |
(0.6) |
(0.6) |
(1.2) |
|
|
4.2 |
67.5 |
71.7 |
4.1 |
40.9 |
45.0 |
The standard rate of corporation tax for the year, based on the weighted average of tax rates applied to the group's profits, is 30.9% (2012: 29.4%). The tax charge for the year is lower than the standard rate of corporation tax for the reasons set out in the following reconciliation:
|
|
2013 |
2012 |
|
|
£m |
£m |
|
Profit before taxation |
271.7 |
185.2 |
|
Corporation tax at standard rate of 30.9% (2012: 29.4%) |
84.0 |
54.4 |
|
Non-taxable income and gains |
(6.1) |
(5.7) |
|
Non-deductible expenditure |
1.0 |
2.0 |
|
Movements on unrecognised deferred tax assets |
- |
0.3 |
|
Research and development tax incentives |
(3.7) |
(3.8) |
|
Other current year tax items |
- |
0.5 |
|
Change in tax rates |
(0.2) |
0.1 |
|
Other adjustments to prior year current and deferred tax charges |
(3.3) |
(2.8) |
|
Total taxation |
71.7 |
45.0 |
Factors that may affect the future tax charge:
The group's tax charge in future years is likely to be affected by the proportion of profits arising, and the effective tax rates, in the various territories in which the group operates.
|
Tax on items recognised directly in other comprehensive income |
2013 |
2012 |
|
£m |
£m |
|
|
Tax on net gain on effective portion of changes in fair value of forward exchange contracts |
0.1 |
1.0 |
|
Tax on actuarial gain arising on pension schemes, net of foreign exchange |
0.9 |
0.6 |
|
Aggregate current and deferred tax charge relating to items that are charged directly to the consolidated statement of comprehensive income |
1.0 |
1.6 |
|
Tax on items recognised directly in the consolidated statement of changes in equity |
2013 |
2012 |
|
£m |
£m |
|
|
Tax on share-based payments |
(4.5) |
(3.6) |
|
Aggregate current and deferred tax credit on items recognised directly in the consolidated statement of changes in equity |
(4.5) |
(3.6) |
The following tax charges relate to items of income and expense that are excluded from the group's adjusted performance measures.
|
Tax on items of income and expense that are excluded from the group's adjusted profit before tax |
2013 |
2012 |
|
£m |
£m |
|
|
Tax charge on unrealised change in fair value of cross-currency interest rate swaps |
0.2 |
0.2 |
|
Tax credit on amortisation of intangible assets |
(9.8) |
(9.1) |
|
Tax credit on acquisition-related costs |
(0.3) |
(0.1) |
|
Tax charge/(credit) on acquisition-related fair value adjustments |
0.2 |
(1.6) |
|
Tax credit on retranslation of short-term intercompany loan balances |
(0.5) |
(0.2) |
|
Tax charges on profit on disposal of business |
33.0 |
- |
|
Total tax charge/(credit) |
22.8 |
(10.8) |
The effective adjusted tax rate for the year was 23.6% (2012: 25.3%) as set out in the reconciliation below.
|
Reconciliation of total tax charge on adopted IFRS basis to adjusted tax charge |
2013
|
2012 Restated |
|
£m |
£m |
|
|
Total tax charge on adopted IFRS basis |
71.7 |
45.0 |
|
Tax (charge)/credit on items of income and expense that are excluded from the group's adjusted profit before tax |
(22.8) |
10.8 |
|
Adjusted tax charge |
48.9 |
55.8 |
|
Divested businesses |
(0.3) |
(4.1) |
|
Adjusted tax charge excluding divested businesses |
48.6 |
51.7 |
|
|
|
|
|
Adjusted profit before tax excluding divested businesses |
205.6 |
204.3 |
6. Dividends
|
Amounts recognised and paid as distributions to owners of the parent company in the year |
2013 |
2012 |
|
£m |
£m |
|
|
Final dividend for the year ended 31 December 2012 of 25.50p (2011: 25.40p) per share |
30.2 |
29.8 |
|
Interim dividend for the year ended 31 December 2013 of 14.75p (2012: 13.50p) per share |
17.5 |
15.8 |
|
|
47.7 |
45.6 |
|
|
|
|
|
|
2013 |
2012 |
|
Amounts arising in respect of the year: |
£m |
£m |
|
Interim dividend for the year ended 31 December 2013 of 14.75p (2012: 13.50p) per share |
17.5 |
15.8 |
|
Proposed final dividend for the year ended 31 December 2013 of 28.00p (2012: 25.50p) per share |
33.2 |
29.9 |
|
|
50.7 |
45.7 |
The proposed final dividend is subject to approval by shareholders at the annual general meeting and has not been included as a liability in these financial statements.
7. 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 year (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 |
2013
|
2012 Restated |
|
Profit after tax (£m) |
200.0 |
140.2 |
|
Weighted average number of shares outstanding (millions) |
118.2 |
117.1 |
|
Basic earnings per share (pence) |
169.2 |
119.7 |
|
Diluted earnings per share |
2013
|
2012 Restated |
|
Profit after tax (£m) |
200.0 |
140.2 |
|
Basic weighted average number of shares outstanding (millions) |
118.2 |
117.1 |
|
Weighted average number of dilutive 5p ordinary shares under option (millions) |
0.7 |
2.1 |
|
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) |
(0.7) |
|
Diluted weighted average number of shares outstanding (millions) |
118.7 |
118.5 |
|
Diluted earnings per share (pence) |
168.5 |
118.3 |
|
8. Disposal of businesses |
|
|
|
In line with the agreement signed 18 December 2012, on 31 January 2013, the group disposed of the Fusion business, part of the In-line Instrumentation segment, for a final consideration of US$175m.
|
|
|
2013 |
|
Effect of disposal on the financial position of the group |
£m |
|
Other intangible assets |
0.3 |
|
Property, plant and equipment |
0.9 |
|
Deferred tax assets |
0.5 |
|
Inventory |
5.1 |
|
Trade and other receivables |
8.1 |
|
Cash |
1.8 |
|
Trade and other payables |
(5.6) |
|
Current tax liabilities |
(0.6) |
|
Provisions |
(0.2) |
|
Net assets divested |
10.3 |
|
|
|
|
Consideration received, satisfied in cash |
110.2 |
|
Cash disposed of |
(1.8) |
|
Transaction expenses |
(3.1) |
|
Net cash inflow |
105.3 |
|
Cash received net of transaction expenses |
107.1 |
|
Net assets disposed of |
(10.3) |
|
Currency translation differences transferred from translation reserve |
1.5 |
|
Profit on disposal of businesses |
98.3 |
|
|
|
|
The sale of the Fusion business did not meet the definition of a discontinued operation given in IFRS 5 'Non-Current Assets Held for Sale and Discontinued Operations' and, therefore, no disclosures in relation to discontinued operations have been made. |
|
The group did not divest of any businesses during 2012.
Disposal of associate
On 19 February 2013, the group acquired certain trade and assets that resulted in a deemed disposal of its 31.2% associate investment in Naneum Limited for £0.7m in cash. The group's share of the associate's results up to the date of the disposal and the gain/(loss) on disposal was not considered material.
9. Company Information
The financial information included in the preliminary announcement does not constitute statutory accounts of the company for the years ended 31 December 2013 and 2012. Statutory accounts for the year ended 31 December 2012 have been reported on by the company's auditor and delivered to the Registrar of Companies. Statutory accounts for the year ended 31 December 2013 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.
10. Annual report
The annual report will be made available to shareholders on 25 March 2014, either by post or on-line, and will be available to the general public on the company's website at www.spectris.com or on written request to the registered office at Heritage House, Church Road, Egham, Surrey TW20 9QD.
This information is provided by RNS
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