24th Oct 2014 07:38
LONDON (Alliance News) - Spectris PLC said Friday that it now expects its full year earnings before interest, tax, and amortisation to be "modestly" below current company-compiled consensus of GBP200 million, as weaker than expected trading patterns from its second quarter continued into the third.
The instrumentation and controls company said sales in its third quarter to end-September fell 5%, as growth contributed by acquisitions of 2% was offset by the strength of sterling, which had a negative effect of 7%. At constant currency and on an organic or like-for-like basis, sales were flat.
In North America like-for-like sales grew 7%, but dropped 3% in Asia Pacific and 6% in Europe due to increasing weakness in Eurozone economies, especially Germany, it said.
Growth in its test and measurement, in-line instrumentation and industrial controls segments were offset by a decline in its materials analysis segment. Sales into the automotive, energy and utilities markets showed good growth, but sales to the pulp and paper industry were lower, particularly in Asia, Spectris said.
In materials analysis, metals, minerals, mining and academic research sectors remained weak, although Spectris noted "signs of improving demand from customers in these markets."
Spectris also said that its operating cash-flow conversion remains strong, and it is maintaining a "healthy financial position". Its net debt at September 30 was around GBP119.8 million, up GBP15.7 million compared to the start of the year, after it made acquisitions in the half year.
Despite the lowered expectations, shares in Spectris are trading up 3.9% at 1,709.00 pence Friday morning.
Jefferies reiterated its Buy rating for the company, saying that the statement will show "a better outcome than many will have feared."
"Today's statement from Spectris is, in our view, more robust than the market was assuming or pricing in," says Jefferies analyst Andy Douglas.
Spectris shares have been in a down trend since mid-June, as a heavy second-half weighting has been a concern for the market, and Jefferies believes the shares were priced for a more negative update. Jefferies says it continues to like the Spectris business, and although it is not expecting "stellar growth" in 2015, it is looking for "solid growth."
Liberum also reiterated its Buy rating for the company, noting that shares have been weak going into the statement. It said that there is an increasing change of a cash return, and in the absence of a large acquisition, management has indicated it will return cash to shareholders.
Numis, which has a Hold rating on the stock, downgraded its forecasts by 5%. It said it believes that Spectris' multiple level represents difficult trading conditions this year, but may offer value as conditions start to improve moving into 2015.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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