Preview: Self-help to boost Spectris PLC

Last year was a tough one for Spectris but the instrumentation and controls specialist should soon start to feel the benefit of cost-cutting and acquisitions

Cost-cutting measures should soon start to move the dial

Instrumentation and controls specialist Spectris had a tricky 2015, with flat sales while profits were hit by restructuring costs.

The company should soon start feeling the benefits of those restructuring efforts and the five acquisitions it made last year.

Shore Capital visited the company last month and came away impressed.

“From our meeting we particularly noted initiatives from management on sales, group margin, stock turn and M&A – which all promise a return to stronger earnings growth and cash flow,” Shore analyst Robin Speakman noted.

“After a successful roll-out for the pulp and paper industry, a process led sales function is being introduced across the group. Instead of seeking to sell units to engineers, the sales process is focused on providing equipment and services for the whole of a client’s operations. This is designed to increase customer retention whilst adding new sales of services, quality testing and software updates in particular,” Speakman said.

Cost-cutting to improve margins

In the physical sciences instrumentation and testing division, group operating margins declined by 1.7 percentage points last year to 15.2%.

“Management believe this figure will not remain at this level, with restructuring and investment in Industrial Controls particularly adding to margin in the next 18 months,” Speakan revealed.

Peel Hunt said that trading is difficult, but cost cutting initiatives will add a net £10mln to underlying earnings (EBIT) this year.

“The outlook is confident from an internal structure point of view, but trading conditions remain very unclear. The balance sheet is strengthening, however, and gives a lot of optionality,” Peel Hunt said.

The Future is ... beige?

Last we heard from publishing group Future, management expectations for the year remained unchanged.

Numis is forecasting half-year revenues of £27mln, an adjusted operating profit of £0.2mln and an adjusted pre-tax profit of £0.2mln. The broker thinks cash on the balance sheet at the end of the reporting period will be £0.6mln.

Significant announcements expected

Interims: Future PLC (LON:FUTR)

Trading statements: Close Brothers Group PLC (LON:CBG), Industrial Multi Property Trust PLC (LON:IMPT), Spectris plc (LON:SXS)

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