FTSE 250 manufacturer Spectris delivered record revenues and profits in 2011.
Spectris (LSE: SXS) is not a household name, but it is a high-quality British manufacturer with a diverse range of specialist products; a stellar example of how British companies can maintain their competitive advantage by moving up the value chain.
Spectris has just published its final results for 2011, a year that saw its revenues rise by 23% to £1.1bn and its operating profit increase by 37% to 175.8m. Operating margin rose by 2.4% to 18.2%, and the company increased its total dividend by 20% to 33.6p.
Where can I buy some?
You are unlikely ever to buy any of Spectris's precision instrumentation and control products, but they are essential for a wide variety of industries that make modern life possible.
Although Spectris is a British company, its sales force, customers and manufacturing facilities are spread across the globe. Relatively little of its revenue comes from the UK, and one of last year's biggest growth markets was China.
Profitable acquisitions
A couple of years ago, Fool writer Malcolm Wheatley took a look at Spectris and commented that it had cut its debt, which had arisen due to acquisitions. Based on this year's results, history is repeating itself. Spectris went on something of an acquisition binge in 2011, acquiring several new companies at a total cost of £372.1m.
Spectris does seem to have a good eye for a deal, as these companies made an immediate contribution to the bottom line for 2011. Acquisitions accounted for 11% of the increase in profit and 8% of the increase in revenue.
Debt mountain
The downside of big acquisitions is often debt, and Spectris is no exception. The company's net debt rose by £270m to £356.2m by the end of 2011.
Interest payments in 2011 were only £9.9m, up just £0.1m from 2010, but the age profile of the debt has shortened noticeably, with £95m due to be repaid in the next two years.
Luckily, Spectris increased its retained earnings from £197.5m in 2010 to £295m in 2011. Hopefully, this will enable the company to reduce its debt burden over the next couple of years.
A quality company
Spectris is a quality company with a very strong track record. Its share price has risen four-fold since the depths of the recession in 2009 but its high level of spending on research and development (7% of revenue) should help to ensure it maintains its current strength.
Forecasts for the next two years are strong, and Spectris currently has a moderate P/E of 11 and a PEG of just 0.2, which suggests that there could be further growth to come.
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