- Like-for-like sales down 8%
- Chinese demand softens
- Full-year guidance unchanged
When we lifted the bonnet on FTSE 250 precision equipment-maker Spectris (SXS) back in March, we suggested the first-quarter update would be the first test of whether analysts were on track with their downbeat views on the firm's prospects.
As expected, the group reported a decline in like-for-like revenue against a strong prior-year quarter but importantly it maintained its full-year guidance. The shares gave up 35p or 1.2% to £32.33 in response.
SOFTER QUARTER
For the first three months of 2024 Spectris reported sales of £309.4 million, an 8% decline against last year’s £354 million on a like-for-like basis.
Spectris Scientific sales were down 6% against a 26% increase last year, driven by lower life sciences and university spending, while Dynamic sales were down 10% against a 21% increase last year, driven by machine manufacturing and automotive end markets.
While comparisons with last year’s first quarter – when group revenue jumped 24% - were always going to be tough, sales were slightly softer than the firm expected, notably in China, although chief executive Andrew Heath expects the trend to improve over the course of the year with the results being second-half weighted.
Nevertheless, the first quarter of 2024 was ‘another productive period for the group’, said Heath. ‘We've successfully implemented the initial rollout of our new ERP system, launched a number of new, market-leading products and completed the sale of Red Lion, which represents the end of our portfolio rationalisation programme.’
Meanwhile, with the sale of Red Lion generating net proceeds of £228 million, the company’s balance sheet gives it significant scope to fund growth both through new products, where increased R&D (research and development) spending is driving ‘an accelerated cadence of new product launches’ this year, and through bolt-on M&A (mergers and acquisitions) where there is ‘an encouraging pipeline’ of deals said Heath.
FULL-YEAR OUTLOOK CONFIRMED
Thanks to the group’s leading product portfolio and broad end-market-exposure, backed by the launch of new products and what it calls ‘a strong self-help story’, Spectris maintained its outlook for the year despite the ‘uncertain’ macroeconomic environment’.
Operating margins are also expected to expand towards the firm’s target of 20% while earnings are supported by accretive M&A and the ongoing share buyback.
