A rather ho hum trading update on Friday from industrial controls, testing and analysis kit designer Spectris (SXS) doesn't really tell us anything new. Underlying trading in the first four months of the year is still tough as old boots with revenue like-for-likes 4% down, albeit with a modest offset from friendlier forex tailwinds and bit of an acquisitions boost. The shares, at £16.93, are flat as a pancake.
A couple of points. First, visibility remains limited so forecasting is still tricky as heck. All the better then that management have been busy behind the scenes, streamlining and cost cutting, which should protect profitability to some degree.
Another point is that demand could (only could, mind) surprise on the upside and, given relatively weak comparatives of last year's second half, even a modest improvement in this rather benign market could make current estimates look light. Numis currently has £188.2 million of operating profit on £1.252 billion sales for the full year to 31 December, implying EPS of 118p and a 51p per share dividend (yield bang on 3%).
Spectris is a fine and innovative British company with years of experience and expertise, and management deserves credit for pulling the right levers during a challenging spell over which it has little control. New products have been launched thanks to Spectris' refusal to significantly reel-in R&D, unique growth initiatives have been set in play to suit each local markets, while acquisitions have also helped.
Given its strong worldwide reputation, one wonders for how much longer Spectris will remain a UK company given the appetite for overseas buyers to swoop in and gobble up our engineering expertise. A full year PE of 14.3 and an implied cashflow yield of 7.5% this year, do not be surprised if Spectris goes the way of so many other UK plcs.