Spectris plc

Spectris reported sales of £570.2 million, up 6% reported and 11% like-for-like; adjusted operating profit was £72.3 million, up 6%; adjusted operating margin was flat at 12.7%; adjusted PBT was £70.3 million, up 8%; and adjusted EPS was 49.8p. Revenue growth was driven by pricing and volume, with management saying the 11% like-for-like increase reflected about 4% pricing and 7% volume. Gross margin was temporarily lower because price increases were still working through the order book while inflation and supply-chain costs stayed elevated. For the full year, management reiterated high-single-digit organic sales growth and margin expansion, said gross margins should recover in H2, expected CapEx of around £50 million to £60 million, around £20 million of SaaS cost for the ERP rollout, and revised additional 2022 R&D spend to £15 million versus £10 million previously guided.

Andrew Heath framed the half as evidence that Spectris’ strategy for profitable growth is working, emphasizing a more focused, higher-quality and more resilient group after portfolio actions including Omega’s sale. He said demand is being supported by customer closeness, new product launches, sustainability themes, and the Spectris Business System, with gains in throughput, lead times and competitiveness. His tone was confident but careful: he acknowledged macro uncertainty, supply disruptions and China lockdowns, but repeatedly pointed to strong order books, pricing power and market-share gains.

Derek Harding highlighted the hard numbers: £570.2 million of sales, £72.3 million of adjusted operating profit, 12.7% adjusted margin, 49.8p adjusted EPS, and £41.8 million of statutory PBT. He said cash conversion was only 39% because the group carried more inventory to protect customer deliveries and spent £31.6 million on capex, including a £20 million investment in PMS’s new Colorado facility; net debt at June was £98.3 million after £150 million of buybacks, with £410 million of Omega proceeds received in early July. He also noted the interim dividend rose 5% to 24.1p and that net debt/EBITDA was 0.6x, leaving room for further investment, acquisitions and shareholder returns.

Analysts focused on three issues: whether the step-up in R&D to 8.3% of sales was structural, how much pricing was still catching up to inflation, and when cash conversion would normalize. Management said the R&D increase reflects strategic investment in growth areas plus some extra engineering effort tied to supply-chain issues, and that they are not seeing signs of underinvestment in any specific area. On pricing, they said increases are sticking and that 4% to 5% of pricing benefit should come through in H2; on cash, Derek said conversion should return toward a more normal 80% to 90% range in the second half. Other questions covered China lockdown impact, supply-chain risk by division, and the M&A pipeline; management said electronics and semiconductors remain the biggest supply risk, especially for HBK and Red Lion, while the M&A pipeline is in a refresh phase after several bolt-ons and they remain disciplined on valuation.