Spectris PLC (LON:SXS) has been downgraded to ‘hold’ from ‘buy’ by analysts at Shore Capital as the broker cautioned on an uncertain profit outlook and implementation delays.
The broker said it believed that the value of the FTSE 250 precision instruments maker’s stock was now fair, based on “a more gradual margin increase than we previously assumed”, adding that a delay in the implementation of a new shared service centre had also been factored into its downgrade decision.
READ: Spectris weak as full-year guidance left unchanged despite solid growth in first-half results
“Steady progress was reported for ‘Project Uplift’, the company’s cost-saving programme, but the implementation of the shared service centre appears to be behind schedule with the location still undecided. We have slightly decreased our forecasted operating margins to reflect the apparent delay and consequence absence of guidance on net costs/benefits” the broker said.
Shore Capital also said that despite the company expecting to deliver 70% of the year’s operating profit in the second half, “the order book is not much stronger than at the same point in previous years”, adding that while they thought the company could deliver on its full-year target, “it is far from certain”.
In its first half results in July, Spectris posted a 6% increase in its adjusted pre-tax profit for the six months to the end of June, to £67.4mln, as sales rose by 3% to £728mln, driven by demand from automotive and pharmaceuticals companies.
In late-morning trading Wednesday, Spectris shares were down 0.8% at 2,327p.