Cleaner.
Healthier.
More
productive.
Spectris plc
Annual Report and Accounts 2023
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Our Purpose
Contents
We harness the power of
precision measurement to
equip our customers to make
the world cleaner, healthier
and more productive.
We are focusing on where we have competitive and differentiated offerings,
positioned in attractive, structural growth markets with high barriers to entry,
to deliver value beyond measure for all our stakeholders.
52
Sustainability
Discover how we are building our business
for the future in our Sustainability report.
48
Principal risks
Find out about how we manage risk in our
day-to-day activities.
78
The Spectris Foundation
Explore how we are championing
equal opportunities and global access to
quality STEM education.
Find out more about us online
at www.spectris.com
Governance
See how the Board and its committees
manage the governance of the Group.
80
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
1
2022 Performance
Strategic Report
Investing in growth
Key Performance Indicators
Spectris in focus
Chairman’s statement
2
6
10 Market overview
12 Chief Executive’s review
20 Our Business Model
22 Our Strategy
24
26
28 Division reviews
40 Financial review
44 Operational excellence
46 Risk management
48
51 Viability Statement
52 Sustainability Report
66 TCFD disclosure
77
Principal risks and uncertainties
Non-financial and sustainability
information statement and index
78 The Spectris Foundation
Governance
80
82
84
Board of Directors
Chairman’s introduction to
corporate governance
Reporting in accordance
with the 2018 UK Corporate
Governance Code
85 Board and Executive Committees
86
Section 172 statement
88 Board evaluation and effectiveness
89 Workforce engagement
90 Our Purpose and our culture
Nomination and Governance
92
Committee Report
Audit and Risk Committee Report
Directors’ Remuneration Report
95
102
120 Directors’ Report
128
Directors’ Responsibility Statement
Financial Statements
129
136
136
137
138
139
Independent auditor’s report
to the members of Spectris plc
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Changes in Equity
Consolidated Statement of
Financial Position
Consolidated Statement of
Cash Flows
139 Notes to the Accounts
190
Spectris plc Statement of
Financial Position
Spectris plc Statement of
Changes in Equity
Notes to the Company Accounts
191
192
2023 performance
Financial highlights
Sales
Adjusted operating profit1
Statutory operating profit
£1,449.2m £262.5m
(2022: £1,327.4m)
Change yoy 9%
LFL1 change yoy 10%
(2022: £222.4m)
Change yoy 18%
LFL1 change yoy 18%
£188.6m
(2022: £172.6m)
Change yoy 9%
Adjusted cash flow conversion1,2
Adjusted operating margin1,2
Statutory operating margin
103%
(2022: 74%)
Change yoy 29pp
18.1%
(2022: 16.8%)
Change yoy 130bps
LFL1 change yoy 130bps
13.0%
(2022: 13.0%)
Change yoy flat
Dividend per share
Adjusted earnings per share1,2
Basic earnings per share
79.2p
(2022: 75.4p)
Change yoy 5%
199.7p
(2022: 159.9p)
Change yoy 25%
140.3p
(2022: 106.7p)
Change yoy 31%
Additional Information
185
Appendix – Alternative performance
measures
203 Additional Information
102
Remuneration
See how our remuneration framework
aligns with the Group’s strategy and the
wider workforce.
Non-financial highlights
Total recordable
incident rate2
0.34
(2022: 0.27)
Energy efficiency2
(MWh per £m revenue)
48.9
(2022: 58.2)
Employee engagement –
Gallup GrandMean score2
3.92
(2022: 3.86)
CDP score
A-
(2022: B)
1.
Alternative performance measures
(APMs) are used consistently throughout
this Annual Report and are referred to as
‘adjusted’ or ‘like-for-like’ (LFL). These are
defined in full and reconciled to the
reported statutory measures in the
appendix to the Consolidated Financial
Statements on page 185.
2. See more in the Key Performance
Indicators section on pages 26 and 27.
2
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Spectris at a glance
Spectris
in focus
Spectris harnesses the power of precision measurement to equip our
customers to make the world cleaner, healthier and more productive.
We are focusing on where we have competitive and differentiated
offerings, positioned in attractive, structural growth markets with
high barriers to entry.
Our go-to-market model
Customer centricity is core to our business
model. We combine leading instruments
and technologies with deep technical
knowledge and domain expertise, adding
value throughout our customers’ workflows.
By going beyond the measurement we
deliver the services and solutions our
customers need, building strong
partnerships that drive innovation and
growth over the long term.
What we do
We combine precision with purpose,
delivering progress for a better world. We
provide critical insights to our customers
through premium precision measurement,
using technical expertise and deep domain
knowledge to deliver value beyond measure
for all our stakeholders.
How we equip customers
We equip our customers to solve some of
their greatest challenges, harnessing the
power of precision measurement to make
the world cleaner, healthier and more
productive.
We leverage our domain expertise alongside
our market leading instruments, software
and solutions to help our customers develop
the technologies to drive the energy
transition, the medicines that cure us, the
materials we build with, the devices that
connect us and the machines that help us
work faster, better and more efficiently.
Our key markets
(2023 percentage of Group sales)
Life sciences/
Pharmaceutical
18% of sales
(2022: 24%)
Technology-led
industrials1, 2
16% of sales
(2022: 16%)
Electronics and
semiconductor
12% of sales
(2022: 11%)
Automotive1
10% of sales
(2022: 10%)
Materials
10% of sales
(2022: 9%)
Academic research
10% of sales
(2022: 8%)
Other
24% of sales
(2022: 22%)
1. 2022 has been represented following a recategorisation of marine and rail from Automotive to
Technology-led industrials
2. Image: Blue Origin
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Spectris at a glance continued
Our organisational
structure
Following the refocusing of the Group over the last few years around premium precision
measurement businesses, Spectris is organised around two key divisions – Spectris Scientific
and Spectris Dynamics – comprising 86% of Group sales.
Spectris Scientific
Comprising Malvern Panalytical and
Particle Measuring Systems
Spectris Dynamics
Comprising HBK
Spectris Scientific is a leader in advanced material
measurement and characterisation.
Spectris Dynamics is a leader in advanced, integrated virtual
and physical test and measurement.
Our organisational
structure
% of Group sales
49%
(2022: 50%)
% of Group sales
37%
(2022: 37%)
Reported sales growth
Reported sales growth
7%
LFL sales growth
12%
10%
LFL sales growth
6%
Adjusted operating margin
Adjusted operating margin
22.0%
(2022: 21.3%)
Employees
2,997
(2022: 2,793)
17.2%
(2022: 15.0%)
Employees
3,455
(2022: 3,407)
Read more on pages 28 to 33
Read more on pages 34 to 39
3
Group sales
4
1
3
2
1
3
2
Sales by location (%)
Sales by business (%)
1 Asia
2 Europe
3 North America
4 ROW
36
31
29
4
1 Spectris Scientific
2 Spectris Dynamics
3 Other
49
37
14
1
7
6
5
4
2
3
Sales by market (%)
1 Life sciences/Pharmaceutical
2 Technology-led industrials
3 Electronics and semiconductor
4 Automotive
5 Metals, minerals, mining
6 Academic research
7 Other
18
16
12
10
10
10
24
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
4
Spectris at a glance continued
Spectris Scientific
Leader in material measurement and characterisation
Leader in material measurement and characterisation, through the
provision of high-precision instruments, workflow solutions, data
science and services
World leader in micro-contamination monitoring solutions for
ultra-clean manufacturers
Customer needs
• Precise, accurate and reliable measurements
• Application-specific solutions matched to
customer workflows
• Instrument configurability and ease-of-use
• Expertise and bespoke analytics
• Maximum yield & instrument uptime
• Portfolio breadth
Competitive strengths
• Best-in-class solutions
• Precision and accuracy of measurement
• Domain expertise
• Predictive maintenance, remote diagnostics
• Automation and in-line/at-line monitoring
• A dynamic, evolving portfolio
Customer needs
• Highest sensitivity
• Maximum yield and uptime
• Sterility assurance and regulatory compliance
• Faster contamination identification
• Predictive analytics
Competitive strengths
• Highest sensitivity and quality
• Reliability and ease of use
• Regulatory knowledge and expertise
• Data integrity
• Complete sterility assurance solutions
• Customer service orientation
Capability
Analytical technique
End markets
X-ray
Fluorescence
X-ray
Diffraction
Elemental Analysis
• Elemental composition
• Layer thickness
• Building Materials,
• Mining & Minerals
• Semiconductors
• Chemicals &
Coatings
• Advanced
Manufacturing
Structural Analysis
• Crystal structure
• Thin film metrology
• Residual stress
• Academia
• Pharmaceuticals
• Semiconductors
• Building Materials
• Batteries
• Mining & Minerals
• Advanced
Manufacturing
Laser
Diffraction
Particle Analysis
• Particle size distribution
Nanometrics
Biophysical
Particle/Molecular Analysis
• Particle size distribution
• Molecular size/structure
• Zeta potential
• Mobility
Interaction and Stability
Analysis
• Binding affinity
• Binding kinetics
• Higher order structure
• Pharmaceuticals
• Batteries
• Chemicals and
Coatings
• Food
• Advanced
Manufacturing
• Mining & Minerals
• Pharmaceuticals
• Pharmaceuticals
• Academia
• Chemicals &
Coatings
• Pharmaceuticals
• Academia
Capability
ظ Airborne
particle
monitoring
ظ Gas particle
monitoring
ظ Ultra-pure
water
ظ Aerosol
particle
monitoring
ظ Microbial
monitoring
ظ Facility
monitoring
systems
Analytical technique
End markets
• Monitoring airborne
• Semiconductor
particulates to provide critical
data on the environment’s
filtration systems
• Ensuring ultra-high purity
in gases for semiconductor
manufacturing and
production of electronics
• Ensuring ultra-pure water for
critical cleaning/rinsing steps
in semiconductor processing
• Monitoring airborne particles
• Life sciences /
Pharmaceutical
in critical environments
ensuring aseptic control of
manufacturing processes
• Continuous air sampling
solutions to provide risk
management against
microbial contaminations
• FacilityPro environmental
monitoring systems
combines the sampling,
reporting, and data retention
of particle, microbial and
environmental data, meeting
data integrity requirements.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Spectris at a glance continued
Spectris Dynamics
World leader in advanced integrated physical and virtual testing and measurement
Experts in the provision of advanced integrated physical and virtual testing and measurement. The Division is focused on four premium product lines:
virtual test, software, data acquisition and high-precision sensors with high growth prospects, where we have leading market positions. These products
are complementary for customers and combine to offer the broadest test and measurement solutions in the market.
5
Customer needs
ظ Accuracy and precision of
measurement
ظ Quality and reliability of product
ظ Usability and increased efficiency
ظ Insights through data
ظ Accelerated development at
lower cost
ظ Increased production quality
and output
ظ Increased asset performance
Competitive strengths
ظ Complete test and simulation
offering
ظ Class-leading reliability and
durability software offering
ظ Highest accuracy sampling
rate and ease of use of data
acquisition hardware and software
ظ Broadest range and sophistication
of analytic capabilities, ease of use
and flexibility
ظ Complete virtual test solution
including software, simulators and
hardware-in-the-loop
Accelerated R&D
In-process testing
Virtual testing
Physical testing
Software solutions for integrated data management and analysis
Life-cycle
stage
Design Optimisation
Virtual testing
Physical testing
Production
Operation/in-use
Capability • Fatigue analysis
• Driver experience
• Failure mode analysis
• Structural durability
simulation
• Real-time computing
• X-in-the-loop testing/
simulation
• Structural durability
• Vibrational durability
• Energy efficiency testing
• Noise emissions testing
• End-of-line testing
• Production quality
• Production efficiency
• Structural health
monitoring
• Noise monitoring
• Enhancing asset
performance
End
market
• Automotive
• Aerospace & defence
• Automotive
• Aerospace & defence
• Automotive
• Aerospace & Defence
• Commercial space
• Electronics
• Other
• Machine manufacturing
• Electronics
• High-value assets
• Commercial space
• Medical
Solutions • nCode DesignLife software
• nCode Aqira software
• Multi-attribute simulators
• COMPACT Full Spectrum
• Sensors: Force/Torque/
Strain/Accelerometers
Simulator
• Data acquisition hardware
• AUTOHAWK hardware-
and software
in-the-loop
• Analytical software
• Real-time operating system
• Torque sensors
• Force sensors
• Production test systems
• Microphones
• Industrial data acquisition
• Load cells
• Accelerometers
• Fibre-optic strain sensors
• Sound-level meters
• Built-in OEM strain sensors
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 6
Chairman’s statement
Delivering our
Strategy for
Sustainable
Growth
“I am excited about the
opportunities that lie
ahead for the Group.”
Mark Williamson
Chairman
Spectris delivered a strong performance in 2023. As well as generating
record profits and a third successive year of double-digit LFL sales and
profit growth, we continued to lay the foundations for sustainable
further success by investing in our people, new products, digital services,
and targeted acquisitions. As I look to the future, I am excited about
the opportunities that lie ahead for the Group and confident in our ability
to continue to deliver against our strategic priorities, benefiting all
our stakeholders.
Introduction
2023 has been another year of strong LFL
sales growth, building on our recent track
record and demonstrating the quality and
strength of the Group. As a result of supply
chains becoming more reliable and the
associated easing of inflationary pressures,
alongside our focus on operational efficiency,
we delivered strong progress on margins.
Demand for the Group’s products remained
strong with LFL sales growth of 10% (2022:
14%) with a 130bps improvement in adjusted
operating margins to 18.1% (2022: 16.8%)
(statutory operating margin 13.0% (2022:
13.0%)) resulting in adjusted operating profit
growth of 18%. The Group remains highly cash
generative with adjusted cash conversion of
103% resulting in the Group ending the year
with a net cash position of £138.8 million
(2022: £228.0 million).
Strategy for Sustainable Growth
2023 was the first full year of our Strategy
for Sustainable Growth, following its
announcement alongside new
performance targets, in October
2022. As can be seen from our
results, our Strategy is really
working for us, delivering growth,
improving profitability and
generating strong cash flow. As a
result, we are well on our way to
delivering our adjusted operating
margin target of at least 20% over
the medium-term.
Our commitment to invest in R&D,
which was 7.5% of Group sales in 2023
(2022: 7.8%), represents an important
part of maintaining strong levels of organic
growth. I am pleased to see a number of new
products launched during the year and the
strength of the pipeline. This investment
ensures our best-in-class product portfolio
remains at the forefront, helping us outgrow
our end markets and maintain leading
market positions and competitive advantage,
key to driving volumes and improving
margins.
During the year, we made progress on
another key pillar of our Strategy, to
compound growth through targeted M&A,
completing a number of acquisitions,
investing a total of £60 million. As well as
bringing new talent into the Group, these
additions provide access to new technologies
and customers as well as broadening our
product offering. We have a healthy pipeline
of potential acquisitions, focused on
technologies closely related to our core
markets and existing expertise.
The announcement in December of the
divestment of Red Lion Controls, also marks
the end of the portfolio rationalisation
programme envisaged in 2019. In Spectris
Scientific and Spectris Dynamics, we now
have two high-quality, premium precision
measurement Divisions with attractive
growth characteristics.
We have also made progress with our
transformation initiatives, with our businesses
on track to commence a phased rollout of a
single ERP system in 2024. The adoption of
the system alongside new, more efficient
business processes, represents a key part of
our journey towards meeting our medium-
term targets.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
7
Chairman’s statement continued
Sales
£1,449.2m
(2022: £1,327.4m)
Dividend per share
79.2p
(2022: 75.4p)
Adjusted earnings per share1
199.7p
(2022: 159.9p)
1. Alternative performance
measures (APMs) are used
consistently throughout this
Annual Report and are referred
to as ‘adjusted’ or ‘like-for-like’
(LFL). These are defined in full
and reconciled to the reported
statutory measures in the
appendix to the Consolidated
Financial Statements on
page 185.
The Group has a good track record of
delivering operational efficiencies and
reducing costs, reflecting our lean culture.
The Spectris Business System (SBS), delivered
further incremental benefits in 2023 and
continues to make a meaningful contribution
to margin expansion. The Board saw,
first-hand, during its visit to the Malvern
Panalytical site in Almelo, the Netherlands,
a number of examples of how the SBS is
bringing tangible benefits to our businesses
and I am delighted to see that a number of
sites were awarded Bronze certification
during 2023, as part of our ‘Going for Gold’
programme.
Leading sustainable business
Sustainability continues to be at the heart
of our strategy. How we do business is as
important as what we do. I am delighted with
our continued progress towards our Net Zero
ambition, including a further 27.0% reduction
in scope 1 and 2 emissions on a like-for-like
basis during the year, as set out on page 64.
Building on our membership of the UN
Global Compact, this year we launched our
new Supplier Code. The code sets out the key
expectations we have for suppliers working
with us to ensure that our value chain is
aligned with our ambition to create a cleaner,
healthier and more productive world. More
details are set out on page 59.
Read more about our approach to sustainability
on pages 52 to 79
Capital allocation
Ensuring the appropriate allocation of
capital remains a key area of focus for the
Board, striking the right balance between
generating strong returns for shareholders
and investing for growth.
The Board remains committed to driving
sustainable organic growth, with significant
continued investment in R&D, while
continuing to use our strong balance sheet to
compound growth through value-enhancing
acquisitions. Our M&A pipeline ranges from
early-stage technologies, through bolt-ons,
to larger acquisitions, where we continue to
maintain an active pipeline of opportunities.
In 2023, we advanced this strategy through
the successful acquisition of MicroStrain
Sensing Systems Business, EMS, the purchase
of the x-ray diffraction line from Freiberg
Instruments and a minority investment
in LumaCyte.
In November, we completed a £300 million
share buyback programme. Following the
divestment of Red Lion, and having
considered the future acquisition pipeline,
we commenced a further share buyback
programme of £150 million, with the first
tranche, of £50 million, commencing in
December 2023. This latest programme,
once completed, will take the total amount
of cash returned through buybacks since
2019 to £650 million. The Board is confident
that our buyback strategy will support the
maintenance of a strong and effective
balance sheet, whilst providing the optionality
to advance the Group’s strategy through
inorganic growth.
The Board is proposing a final dividend of
53.9 pence per share which, when combined
with the interim dividend of 25.3 pence per
share, gives a total of 79.2 pence per share
for the year. This equates to a 5% increase, in
line with our policy of making progressive
dividend payments based on affordability
and sustainability. We are proud that Spectris
has an established track record of increasing
the dividend every year for the past 34 years.
Looking ahead, the Group’s strong cash
generation and robust balance sheet
continues to provide flexibility and agility to
pursue further value-creating opportunities
as they arise.
Our people and culture
Our people are critical to the success of the
Group, with an engaged and motivated
workforce key to building and maintaining a
sustainable business. During the year, I was
pleased to visit Malvern Panalytical in
Almelo, the Netherlands, with the Board,
which included the opportunity to meet
Section 172 statement
The Board of Directors confirm that during the year
ended 31 December 2023, it has acted to promote the
long-term success of the Company for the benefit of
shareholders, whilst having due regard to the matters set
out in section 172(1) of the Companies Act 2006, being:
(a) the likely consequences of any decision in the
long term
(b) the interests of the Company’s employees
(c) the need to foster the Company’s business
relationships with suppliers, customers and others
(d) the impact of the Company’s operations on the
community and the environment
(e) the desirability of the Company maintaining a
reputation for high standards of business conduct
(f)
the need to act fairly between members of the
Company
Read more about how the Board supports its Section 172
statement throughout the Corporate Governance section
with specific examples on pages 86 and 87
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
8
Chairman’s statement continued
representatives from the Almelo early careers
network as well as to see the emphasis placed
on safety and SBS across the site.
Kjersti Wiklund, our Workforce Engagement
Director, has remained instrumental in
providing the Board with valuable oversight
of the development of the Group’s culture,
having held a number of face-to-face
engagement sessions throughout the year
with our people in Korea, Denmark and
the Netherlands.
Now in its third year, the scores from our
global Gallup employee engagement survey
improved once again, increasing to a
GrandMean of 3.92 (2022: 3.86), which is
testament to the work being done to
promote a strong, inclusive culture
underpinned by Our Values. During the year,
the Board received regular updates on the
development of the Group’s culture and
continued to seek ways of further developing
and advancing the Values-led, healthy
high-performance culture of our business.
We remain committed to ensuring that we
are building a diverse and inclusive workforce,
recognising that a diverse workforce makes
us more innovative, creative and competitive.
I am pleased to see the increased gender
diversity in our senior leadership community
and our ambition to increase the number of
women in leadership roles to at least 40%
by 2030. In support of this ambition, I am
delighted that we are partnering with peer
companies in our sector to support the 25x25
initiative. In line with the Parker Review, we
have set a target to increase ethnic diversity
across our UK-based leadership population
and we are progressing work to define our
global ambition on ethnic diversity. Further
details are set out on page 56.
Read more about our People strategy
on page 54
Board changes
Bill Seeger will retire from the Board at the
conclusion of the 2024 Annual General
Meeting (AGM), having served since January
2015. On behalf of the Board and the wider
Group, I would like to extend my sincere
thanks and appreciation to Bill for his
immeasurable contribution to the Group as
Senior Independent Director and Chairman
of the Audit and Risk Committee. Cathy
Turner succeeded Bill as Senior Independent
Director in May 2023 and Mandy Gradden will
assume the role of Chairman of the Audit and
Risk Committee at the conclusion of the
2024 AGM.
A succession process has been initiated for
Ulf Quellmann, who will also have served on
the Board for nine years at the 2024 AGM.
Reflecting on the loss of experience in the
departure of Ulf and Bill, it is proposed that Ulf
remain on the Board for one further year to
provide continuity and support to the Group
before retiring ahead of the 2025 AGM.
Further details are set out on page 82. Mandy
Gradden joined the Board, and Audit & Risk
Committee in October 2023, and will be
appointed as Chairman of the Audit and Risk
Committee at the conclusion of the 2024
AGM. In her current position as Chief Financial
Officer of Ascential plc, Mandy brings a
wealth of financial experience as well as a
strong background in strategy, investor
relations, digital and software, and I am
delighted that she has joined the Board.
Read more about our approach to Corporate
Governance on page 82
The Spectris Foundation
The Spectris Foundation has continued
to build on its early impact in 2023, with
£1.61 million donated to charities to date
to encourage greater inclusion and access
to science, technology, engineering and
mathematics (STEM). In addition, the
Foundation has approved 53 donations to
employee-nominated causes since its launch
in 2021. I am delighted that we are supporting
our employees to give back to their local
communities. Recognising its impact, I am
proud that the Board has agreed to increase
our ambition for the Foundation making a
further contribution of £1 million in 2023 with
the ambition to contribute an additional
£5 million by 2030.
Summary and outlook
The Board is very aware of the evolving
legislative and regulatory requirements
impacting the Group, notably in relation to
sustainability, over the coming years. We will
ensure these regulations remain front of
mind. As we oversee the Group’s strategy,
we are committed to coordinating the
implementation of new workstreams aligned
to the new regulations in an efficient and
proportionate way.
On behalf of the Board, I would like to thank
all our employees for their continued
dedication and hard work in delivering
another strong performance in 2023. We have
made a great start on the next phase of our
development to advance our ambition to be
a leading sustainable business, delivering on
our Purpose to make the world cleaner,
healthier and more productive.
As we look ahead to 2024 and beyond,
I am confident that we remain well
positioned to continue to execute our
Strategy for Sustainable Growth and deliver
another year of progress.
Mark Williamson
Chairman
28 February 2024
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
The Spectris Foundation
Spotlight
9
The Spectris Foundation is a
registered charity working across
the globe.
The Foundation was established with the
belief that every person should have an
equal right to quality Science, Technology,
Engineering and Mathematics (STEM)
education. The Foundation’s mission is to
support charitable initiatives through
grant-making, with a particular focus on
enhancing and improving access to
quality education in STEM; to empower
students from all backgrounds.
Read more about The Spectris Foundation
on pages 78 to 79
£16m
£15 million endowed in 2021 by Spectris plc to
create the Spectris Foundation with a further
£1 million contribution in 2023.
Since inception:
The Spectris Foundation has awarded
£1,365,799
(STEM and Employee nominations)
with £1,161,299 committed to STEM education
Grant awarded
£50,000
Timescale
1 year 2023 – 2024
Location
UK-wide
Total awarded
£267,000
Timescale
2 years 2023 – 2025
Location
USA & Global
Apps for Good
Giving young people the skills to
shape their future.
Technovation
Empowering girls to become leaders,
creators and problem-solvers.
In a world transitioning towards digital transformation, many
young people are being left behind, as they lack the necessary
knowledge and skills to thrive in our digital world, due to adversity
or disadvantage. The number of students pursuing IT courses in
the UK at various levels (GCSE, A-Level, further education courses,
and apprenticeships) is declining at an alarming rate.
Technovation are a global technology education not-for-profit
organisation that empowers girls to become leaders, creators and
problem-solvers. Their innovative program equips young women
with the support of volunteer mentors and parents. Girls work in
teams to code mobile apps that address real-world problems and
help them develop into our future entrepreneurs and leaders.
Apps for good believe that all young people should be empowered.
They provide free tech innovation courses to schools, giving
teachers ready-made education content, so young people from all
backgrounds can develop computing and essential skills to create
a brighter future through technology.
In the dynamic world of technology, a striking gender gap persists,
with just a 25% representation of women in the sector. Amidst this
global challenge, Technovation has emerged as a beacon of hope,
dedicated to empowering young women through technology in
their communities.
The Spectris Foundation are partnering with Apps for Good to
launch and expand their new project, Apps for Social Action (ASA).
ASA is a solution-focused tech course focusing on young people,
who are facing adversity, disadvantage, or are part of a minority
group. The courses equip them with the essential skills to tackle
pressing societal issues, empowering young people to use digital
technology to positively influence the world they are living in.
The Spectris Foundation is supporting Technovation to impact
1,426 young women’s lives through Technovation Girls.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
10
Market trends
Accelerating
growth in
our markets
Our portfolio is focused and aligned
to attractive, technology-driven,
structural growth markets,
underpinned by strong sustainability
themes to make the world cleaner,
healthier and more productive –
aligned with our Purpose.
Cleaner
• Climate change and increasingly scarce
resources require new solutions to solve
the global environmental crisis; including
the transition to cleaner energy and
mobility solutions.
Healthier
• Ageing populations and a rising
middle class in developing countries
require greater healthcare provision,
driving innovation across the Life
sciences / Pharmaceutical space.
• Growing populations are increasing the
need for precision agriculture and the
evolution of food production.
More productive
• A more digital and automated world
demanding ever more advanced
computing, smart sensors, software
and simulation; compounded by the
need of our customers to improve yield,
productivity and competitiveness.
Life sciences/
Pharmaceutical
Technology-led
industrials1,2
Electronics and
semiconductor
Pharmaceutical investment
continues to grow, driven by
demand for conventional and
innovative biologics-based
therapies. This growth is
underpinned by onshoring
activities, the application of
analytics to improve drug pipeline
efficiency and an increased
regulatory focus on data integrity.
A more connected and automated
world demanding ever more
advanced computing and data is
underpinning growth. In a higher
inflationary environment, an
increased focus on enhancing
processes and assets to drive
improvements in productivity and
yield is also supporting demand.
Rising investment to satisfy
amplified demand for digital
infrastructure and greater
processing power, combined
with fast-evolving technologies
such as 5G, internet of things,
artificial intelligence and
machine learning; supported by
reshoring activities.
Sales 2023
18%
(2022: 24%)
Expected medium-term
market growth
5–7%
Sales 2023
16%
(2022: 16%)
Expected medium-term
market growth
5–7%
Sales 2023
12%
(2022: 11%)
Expected medium-term
market growth
6–8%
1. 2022 has been represented following a recategorisation of marine and rail from automotive to technology-led industrials
2. Image: Blue Origin
• We have simplified our portfolio, with increased focus
on core activities in attractive end markets.
• We have differentiated positions, supported by sustainable
growth trends and a strong market share opportunity.
Read more about Our Markets
on pages 10 and 11
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Market trends continued
11
Automotive1
Materials
Academic
research
Other
Investment in automotive R&D
is being driven by new platforms
and a focus on electric vehicles, as
well as new technologies for
autonomous and increasingly
connected vehicles. A growing use
of simulation and software is
required to generate smarter
insights early on and to develop
products faster, more efficiently
and in a more sustainable manner.
Demand for new battery and
catalyst materials to drive the
energy transition and increasing
focus on green metals and mining
to minimise the environmental
impact of production activities.
This is leading to greater adoption
of new technologies, automation
and digitisation, fuelling demand
for digitally connected instruments
and remote monitoring/analytics.
Demand for advanced analytical
and test systems, is being
driven by the development of
next-generation advanced
materials and technologies for
a cleaner, healthier and more
productive world.
Includes other technology-driven
markets such as Energy & Utilities
and general Industrial Automation/
Industry 4.0.
Sales 2023
10%
(2022: 10%)
Expected medium-term
market growth
4–6%
Sales 2023
10%
(2022: 9%)
Expected medium-term
market growth
5–6%
Sales 2023
10%
(2022: 8%)
Expected medium-term
market growth
5–6%
Sales 2023
24%
(2022: 22%)
Expected medium-term
market growth
3–5%
“Spectris today is a higher quality business, with a clear strategy and
strong positions in attractive, sustainable, structural growth markets.”
Andrew Heath, Chief Executive
2023
Read more about Our Strategy
on pages 22 and 23
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 12
Chief Executive’s review
A healthy, high-
performance
culture
“With thanks for the hard work of
my colleagues, we made further,
excellent progress in 2023,
delivering another year of double-
digit sales growth, record
profit and an operating
margin in excess of 18%.”
Andrew Heath
Chief Executive
2023 was an excellent year for Spectris, reflecting the strength of the
business and the strong execution of our Strategy for Sustainable Growth.
Our people have continued to aim high, delivering a third successive year of
double-digit sales growth and record profitability. Our strong performance
is consistent with the ambitious, medium-term targets we laid out in
October 2022 and provides further evidence of how we have improved the
quality and resilience of our business.
Double-digit LFL sales growth with
strong margin expansion and record
operating profit
I would like to thank all my colleagues across
Spectris for their commitment to delivering
positive outcomes for our customers, working
hard for each other and driving great results
for the Group. Thank you for living our Values
and inspiring a bold, high-performing
culture that continually goes beyond and
embraces our Purpose to make the world
cleaner, healthier and more productive.
Despite the return of more normal customer
ordering patterns in 2023, following the
easing of global supply chains, our order book
remains robust, providing good levels of
visibility as we entered 2024. Order cover of
between 4 and 5 months is higher than
where the Group has been historically
pre-pandemic, is in line with our expectations
and consistent with where we expect order
cover to settle over the medium-term.
We maintained strong sales momentum,
with LFL sales growth of 10% which was
ahead of our end markets, reflecting the
introduction of exciting new products and
the excellent conversion of our record order
book at the start of the year. LFL sales
exceeded the expected medium-term
market growth rates in each of our major end
markets with the exception of life sciences/
pharmaceutical, where sales were 9% lower.
This reflects the earlier normalisation of
demand in this market after strong growth
in 2022 and 2021.
We also continue to deliver higher quality,
more profitable growth, with Spectris
Dynamics producing a particularly
impressive performance, delivering on the
targets they set at the start of the year and
carrying good momentum into 2024. Our
focus on operational excellence, positive net
pricing and a more benign input cost
environment resulted in a 130bps increase in
adjusted operating margins. The improved
productivity and competitiveness is being
driven through the Spectris Business System
(SBS), which once again delivered significant,
incremental benefits in 2023, materially
contributing to the increase in profitability.
The Group delivered a record adjusted
operating profit in 2023 – above our previous
high in 2019, even after our divestment
programme. Our adjusted operating margin
of 18.1% fulfils a pledge we made when I joined
Spectris in 2018, to restore Spectris to its
previous margin highs. It is evidence of the
progress made and the strength of our
businesses, that we now see this as a stepping
stone, on our way to margins in excess of 20%.
We are highly cash generative, with cash
conversion over 100% on an adjusted basis,
enabling us to maintain very strong balance
sheet optionality and flexibility to invest
in growth.
During the year we invested £108 million in
R&D to ensure the future pipeline remains
strong. We continue to have significant
success in commercialising our technology
with a number of new products launched in
the year with additional exciting launches
planned for 2024. We made four acquisitions/
investments to bolster our capabilities and
continued to develop further acquisition
opportunities which we will work hard to
realise in 2024. And in accordance with our
capital allocation priorities, we completed the
£300 million share buyback programme
announced in April 2022 and commenced
the first tranche of the £150 million share
buyback programme announced in
December 2023.
Towards the end of the year, we announced
the sale of Red Lion Controls which, when
completed, will mark the conclusion of the
portfolio rationalisation envisaged in 2019. This
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023
13
Chief Executive’s review continued
Sales
£1,449.2m
(2022: £1,327.4m)
Change yoy 9%
LFL change yoy 10%
Adjusted operating profit
£262.5m
(2022: £222.4m)
Change yoy 18%
Adjusted operating margin
18.1%
(2022: 16.8%)
Change yoy 130bps
Investment in R&D
7.5%
(2022: 7.8% of sales)
programme has simplified and focused the
Group through the divestment of eight
businesses, at attractive valuations,
generating £1.4 billion in gross proceeds,
allowing us to reinvest in our future, as well
as underpinning returns to shareholders.
The SBS represents a key building block to
meeting our medium-term adjusted operating
margin target of 20% plus. I have been
impressed with the commitment to the SBS
and the tangible progress I have seen across
our sites during my visits throughout 2023.
During the year, we commenced our ‘Bronze,
Silver, Gold’ certification programme to drive
lean operations across our core operational
metrics, with seven of our sites achieving
Bronze certification by the end of the year.
And we have enhanced our credentials as a
leading sustainable business making strong
progress towards our Net Zero ambition with
a 27% reduction in our like-for-like scope 1
and 2 emissions, and achieving an ‘A-’ in our
recent CDP rating. I am also very pleased
with the progress we are making to ensure
Spectris continues to be a great place to work
with our engagement scores increasing again
in 2023, rising to 3.92 (out of 5.00), up from
3.86 in 2022 and 3.72 in 2021.
Our performance in 2023 provides further
evidence of the renewed strength of the
business and demonstrates the benefit of
the breadth of our portfolio, with exposure to
both early-cycle and late-cycle end markets,
with broad geographic exposure. Our
high-quality, focused business, along with our
strong self-help story, provides confidence in
our outlook for 2024 and beyond.
Significant opportunities lie ahead for
the Group
Spectris today is a very different business
than it was five years ago. We have carefully
and systematically refocused the Group
around premium precision measurement
businesses with attractive financial
characteristics and long-term sustainable
growth prospects, where we are solving some
of our customers’ toughest challenges.
We have already seen the impact on our
performance, delivering strong levels of
organic growth and increased operating
margins. We have also significantly
strengthened our financial position, while
increasing investment in future growth
through higher levels of R&D and targeted
M&A. And alongside this, we have steadily
increased shareholder returns through our
progressive dividend and share buyback
programmes.
But we are far from done. We are working to
truly unlock the Group’s full potential. With
great people united behind a clear Strategy
and common Purpose, I have never been
more excited about the future for Spectris as
I am today.
Spectris today is a higher quality business.
The progress and investments we have made
have created a stronger platform and a
business with a clear Purpose. I have often
said that we are a business blessed with
opportunities, and we now more focused in
our pursuit of them than ever before.
In 2024 and beyond, we will build on these
strong foundations. We cannot remove the
uncertainty from some of our end markets,
but there are a number of levers we control
to drive further progress in the years ahead.
These ‘self-help’ opportunities include the
implementation of a programme to
transform our business processes, via the
rollout of a single, cloud-based ERP solution,
in addition to the SBS. The new system will
provide a number of benefits, improving
the visibility we have across the business,
increasing our efficiency and making us more
agile. Once complete, the new system will
contribute an additional 150bps of margin, an
important building block towards our target
of at least 20%.
We are focused on creating shareholder
value through a balanced approach to
capital allocation. Our strong balance sheet
provides the flexibility to maintain high levels
of investment in R&D. We have a strong
pipeline of new products and services that
we will bring to market over the coming
years, improving the vitality of our portfolio
and helping us maintain our competitive
advantage.
Investing in our people
We are committed to creating
a healthy, high-performance
culture underpinned by Our
Values of Aim High, Own It, Be
True. We continue to make
encouraging progress on our
journey and driving high levels
of engagement across the
Group.
GrandMean
3.92
(2022: 3.86)
Driven by innovation
The strength and resilience
of our businesses and their
competitive positions is
being further enhanced
by increased investment in
R&D as well as adding new
capabilities through
acquisitions and investment
in new technologies.
Investment in R&D
£108.1m
(2022: £103.8m)
Committed to sustainability
We are making strong progress
towards delivering our
ambition to become Net Zero
across our own operations
(scope 1 and 2) by 2030 and
across our value chain (scope 3)
by 2040.
Scope 1 and 2 emissions
12,144 tonnes CO2e
(2022: 17,546 tonnes CO2e)
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 14
Chief Executive’s review continued
Compounding growth through targeted
acquisitions remains a top priority and we
would like to build on the 12 acquisitions and
investments we have made since 2019. We
have strengthened our teams within the
business, generating leads, evaluating
opportunities and maintaining a healthy
pipeline of potential acquisitions, ranging
from small bolt-ons to larger acquisitions.
And, as we have demonstrated, we will
return excess cash to shareholders if
opportunities to make acquisitions do not
crystallise in a reasonable time-period. When
completed, our latest £150 million share
buyback programme will increase the total
amount of cash returned to shareholders
through buyback programmes to
£650 million since 2019.
We will also continue to build on the great
progress we have made by reducing our
impact on the planet through our
sustainability initiatives, to meet our Net Zero
goals by 2030 and 2040. And we are building
a lasting legacy for future generations
through our work with the Spectris
Foundation, with a plan to contribute an
additional £6 million between 2023 and 2030,
to support access to quality education in
STEM for people across all backgrounds.
Delivering on these initiatives and
opportunities is only made possible by the
determination of our people, working for each
other, and with our customers, to help solve
some of their most critical challenges. I am
proud of the work we have done to create a
healthy, high-performance culture, a critical
ingredient in our recent and future success.
We will continue to invest in our people to
drive even higher levels of engagement as we
execute our Strategy.
Despite the near-term macroeconomic
environment, I am more confident than
ever in the future for Spectris, as a leading
sustainable business, capable of
compounding growth through the cycle
and continuing to expand margins.
Strategy for Sustainable Growth
Our Strategy for Sustainable Growth is
delivering compound growth and increased
profitability, along with strong cash flow and
returns on invested capital. This is reflected in
our medium-term performance targets for
the Group to deliver:
• Organic sales growth of 6-7% through
the cycle
• Adjusted operating margin of 20%+
• Cash conversion of 80-90%
• Return on gross capital employed (ROGCE)
in the mid-teens %
• Net Zero and increased employee
engagement
The achievement of these performance
objectives will materially enhance the value
of the Group and deliver significant benefits
to all of Spectris’ stakeholders. The Group’s
Strategy and business model is aligned to
delivering this framework, through six
key elements:
1. Great businesses
Asset-light businesses focused on premium,
precision measurement solutions and
industry-leading domain expertise, aligned
with our Purpose.
2. Structural growth markets
Aligned with attractive, sustainable, structural
growth markets with high barriers to entry.
3. Customer centricity
Solving our customers’ challenges with
leading, differentiated solutions, equipping
them to make the world cleaner, healthier
and more productive.
4. Investing in growth
Disciplined capital allocation for the benefit
of all stakeholders – investment in growth
through R&D and M&A.
5. Operational excellence
Leveraging the SBS business improvement
projects and our high-performance culture.
6. People and Culture
Purpose-led, healthy, high-performance
culture with a clear ambition to create a
positive and lasting impact to the planet
and society.
Organic
sales
growth
Adjusted
operating
margin
Adjusted
cash
conversion ROGCE
ESG
6-7% 20%+
80–90% Mid-teens % Net Zero – Scope 1 and 2 by 2023;
Our medium-
term targets
2023
10%
18.1%
103%
19%
2018
5%
15.5%
59%
13.7%
* Market-based emissions
Great businesses focused on premium,
precision measurement solutions
Spectris is built around Spectris Scientific
and Spectris Dynamics, two world class,
asset-light businesses focused on premium,
precision measurement solutions with
industry-leading domain expertise and
strong IP. Together, the two Divisions
represented 86% of Group revenue in 2023
with the Other Division (consisting of Red
Lion Controls and Servomex) representing
the remainder.
Spectris Scientific is a leader in advanced
material measurement and characterisation,
for the high growth end markets of
pharmaceuticals & food, primary materials,
advanced materials, semiconductors and
academic research. We are well positioned in
high-value, premium areas where our domain
expertise and analytics are valued by customers
throughout the workflow. Our customers
need the best measurement, and can’t, and
won’t, compromise. The Division is made up
of two businesses today: Malvern Panalytical
and Particle Measuring Systems (PMS).
Malvern Panalytical is a world leader in
materials analysis and characterisation, where
we compete based on the precision and
accuracy of measurement, our best-in-class
solutions, our applications knowledge as well
as a dynamic and evolving product portfolio.
Our PMS business is a world leader in
delivering micro-contamination monitoring
solutions for ultra-clean manufacturing
Scope 3 by 2040
Engagement – 4.06 by 2025
Scope 1 and 2* – 12,144.1 tCO2e year-on-year
reduction of 27.0%.
Engagement improved year-on-year
by 0.06 to 3.92
Scope 1 and 2* – 82,861.0 tCO2e
(Scope 3 and Engagement not measured
in 2018)
environments, where we win on the basis of
having technology with the highest sensitivity
and quality, our regulatory expertise, data
integrity and the provision of complete
sterility assurance solutions.
As announced in December 2023, the
divestment of Red Lion Controls marks an end
to our portfolio rationalisation programme
envisaged in 2019. On completion of the sale,
which is expected in the second quarter of
2024, we anticipate Servomex moving from
our Other Division and being reported as part
of Spectris Scientific. As a world leader in the
provision of specialist premium gas and
moisture analysis, Servomex is a great
business that fits well with Spectris Scientific’s
focus on premium precision measurement
instruments and solutions. Servomex serves
many of the same end markets with exciting
new technology in the pipeline and strong
potential to address customer needs in the
energy transition, particularly in areas such as
carbon capture and hydrogen.
Spectris Dynamics is a world leader in the
provision of advanced integrated physical and
virtual testing and measurement. The Division
is focused on four premium product lines
with high growth prospects, where we have
leading market positions: virtual test;
software; data acquisition; and high-precision
sensors. These products are complementary
for customers and combine to offer the
broadest test and measurement solutions in
the market.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023
Chief Executive’s review continued
In virtual test we provide a complete solution
including software, simulators and hardware-
in-the-loop; in data acquisition (DAQ) our
strength lies in the accuracy and sampling
rate as well as the ease of use of our DAQ
hardware and software; our software offering
is known for its range and sophistication of
analytic capabilities, ease of use and flexibility;
and our sensors win on the back of their
accuracy, reliability, durability and the breadth
of our offering.
Spectris Dynamics supports customers in
the long-term growth markets of automotive,
aerospace and defence, machine
manufacturing and personal electronics.
These end markets are requiring greater test
and measurement functionality and fidelity
to accelerate the time to market for new
products, reduce cost and manage
increasingly sophisticated measurements for
automated manufacturing and in-process
applications.
Aligned with attractive, sustainable,
structural growth markets
As a result of the rationalisation of our
portfolio over the last four years, additional
investment in R&D and enhanced capabilities
through acquisition, Spectris today is a more
focused, streamlined, and resilient business
positioned in markets benefiting from a
number of structural growth drivers and
sustainability trends:
• Life sciences/pharmaceutical (18% of
Group sales) – growth is driven by demand
for both conventional and innovative
biologics-based therapies, supported by
onshoring activities, the application of
analytics to improve drug pipeline
efficiency and an increased regulatory
focus. We play in three main areas, with the
first two serviced by our Malvern
Panalytical business: (1) Small molecule
drug discovery, development and
manufacturing – where we are a market
leader in stability, affinity and structure
analysis; (2) Biologics drug discovery,
development and manufacturing – where
we have built a strong position in affinity
and stability analysis; and (3) Aseptic
manufacturing – our PMS business is a
market leader in the provision of
instruments and services to support
micro-contamination monitoring in
pharmaceutical cleanrooms.
• Technology-led industrials (16% of Group
sales) – a more connected and automated
world demanding ever more advanced
computing, sensing and data is
underpinning growth. In a higher
inflationary environment, an increased
focus on enhancing processes and assets
to drive improvements in productivity
and yield is also supporting demand. We
generate revenue from two main areas
both of which contribute around half of
the total revenue for this end market: (1)
providing our leading smart and OEM
sensor capability to machine
manufacturers and OEMs; and (2) from
aerospace and defence where our leading
real-time computation systems, sensors,
data acquisition systems and software
provide customers with leading test and
measurement technology in a number of
critical applications.
• Electronics and semiconductor (12% of
Group sales) – growth is being driven by
rising investment to satisfy higher chip
demand for digital infrastructure and
greater processing power, combined with
fast evolving technologies such as 5G,
internet of things and machine learning;
supported by reshoring activities and the
construction of new fabrication plants
across the world. Demand for our high
sensitivity particle counters for
semiconductor cleanrooms and particle
characterisation instruments for silicon
wafer structural analysis accounts for the
majority of revenue for this end market,
with the remainder coming from consumer
electronics, including precision
microphones, speakers and voice-control
systems.
• Automotive (10% of Group sales) –
investment in automotive R&D is being
driven by electric vehicles and the rapid
expansion of new manufacturers and
platforms, as well as new technologies for
autonomous and increasingly connected
vehicles. A growing use of simulation and
15
Six key elements of our Strategy for Sustainable Growth
1. Great businesses
Asset-light businesses focused on premium, precision
measurement solutions and industry-leading domain
expertise, aligned with our Purpose.
2. Structural growth markets
Aligned with attractive, sustainable, structural
growth markets with high barriers to entry.
3. Customer centricity
Solving our customers’ challenges with leading,
differentiated solutions, equipping them to make
the world cleaner, healthier and more productive.
4. Investing in growth
Disciplined capital allocation for the benefit of all
stakeholders – investment in growth through
R&D and M&A.
5. Operational excellence
Leveraging the SBS business improvement projects
and our high-performance culture.
6. People and Culture
Purpose-led, healthy, high-performance culture with
a clear ambition to create a positive and lasting impact
to the planet and society.
Read more information on our Strategy on pages 22 and 23
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 16
Chief Executive’s review continued
software is being used to generate smarter
insights earlier during product development
to bring products to market faster, more
efficiently and in a more sustainable
manner. Around two-thirds of our revenue
from this end market is derived from EV
development and production with our
offering centred around virtual simulators,
hardware-in-the-loop, sensing and data
acquisition capabilities and end-of-line
testing.
• Materials (10% of Group sales) – a growing
need for sustainable, responsible and more
effective sourcing to minimise the
environmental impact of mining activities is
leading to a greater adoption of automation
and digitisation, closer to the point of
extraction. This is also fuelling demand for
digitally connected instruments and
remote monitoring/analytics. The energy
transition is also driving significant demand
for new chemistries and materials for
batteries and power electronics along with
catalyst development and advanced gas
analysis for carbon capture and the
hydrogen economy. Advanced
manufacturing and the drive for efficiency
and weight saving also required the
development of new materials. The bulk of
our revenue in this end market is currently
derived from material characterisation in
mining, metals, petrochemical and building
materials production, with the remainder
from analysis to support the production of
advanced materials such as batteries.
• Academia (10% of Group sales) – recovery
in research funding is driving demand for
advanced analytical and test systems,
focused on developing next generation
technologies for a cleaner, healthier and
more productive world.
• In 2023, LFL sales exceeded the expected
medium-term market growth rates in
each our major end markets with the
exception of life sciences/pharmaceutical,
where sales were 9% lower. This reflects
the earlier normalisation of demand in
this market after strong growth in 2022
and 2021.
Customer centricity: leading solutions to
make the world Cleaner, Healthier and
More Productive
Customer centricity is core to our business
model. Over the last four years we have
shifted from transactional selling of hardware
to concentrating on solutions, where we add
value throughout our customers’ workflows
and processes. We serve over 67,000
customers globally and having reshaped
the portfolio, our retained businesses
predominantly go to market directly with
over 80% of sales being direct to customers
supported by over 2,200 sales, service and
application engineers reflecting our high-
touch approach. Our domain expertise is
highly valued, with over 60% repeat
customers annually and class-leading net
promoter scores.
Our large and growing installed base has
allowed us to build a strong aftermarket
annuity, with recurring and service revenues
now accounting for around a third of
Group sales with software accounting for
approximately a third of that. And through
new innovations such as SMART Manager,
which enables connections to customers’
instruments in the field, we are expanding the
range of aftermarket services that we provide.
During 2023, we continued to work across
the world with customers using our expertise to
help them solve their most critical and complex
challenges. Two such examples include:
• At Spectris Scientific, we are delighted
that the team at MIP Discovery, a leading
developer of solutions for a range of
diagnostics and healthcare applications in
the UK, chose our particle characterisation
technology. MIP is deploying our recently
launched NanoSight Pro nanoparticle
tracking analyser along with our Zetasizer
system in the development of innovative
alternatives to biosensor-based testing
devices for drugs and also diseases,
including coronaviruses and many cancers.
MIP identified a number of key benefits of
the NanoSight Pro including easy
installation, alignment of software, faster
results analysis, accuracy and a reduction in
the use of expensive samples.
End market sales and growth rates
Life sciences / pharmaceutical
Technology-led industrials
Electronics and semiconductor
Automotive
Materials
Academia
Other
• At Spectris Dynamics, EDAG Group, one of
the world’s largest independent
engineering partners for vehicles and smart
factories, announced that our leading
driving simulator and hardware-in-the-loop
technology will feature at its Zero Prototype
Lab at its development centre in Wolfsburg,
Germany. Our state-of-the-art simulator
offering will provide key tools in the centre,
with EDAG investing in our DiM500, our
largest simulator, along with the COMPACT
Full Spectrum Simulator ( COMPACT FSS)
and an additional AutoHawk hardware-in-
the-loop platform. The provision of a
comprehensive suite of simulation tools will
empower EDAG Group in pushing the
boundaries of engineering services and
also provide an excellent reference point for
other automotive customers.
Investing in growth through R&D
The strength and resilience of our businesses
and their competitive positions is being
further enhanced by increased investment
in R&D as well as adding new capabilities
through acquisitions and investment in new
technologies.
We invested £108.1 million in R&D in 2023
(2022: £103.8 million) representing 7.5% of sales
(2022: 7.8%) in line with our stated guidance.
Our direct sales approach enhances customer
intimacy and fosters an environment of
customer-back innovation with our strong
innovation pipeline fuelling future organic
growth and market share gains. We continue
to see strong interest from customers and are
having significant success in commercialising
Sales
2023
(£m)
267
233
175
149
142
142
341
Sales as
% of total
Group
LFL sales
Growth
%
Expected
medium-term
market growth
%
18%
16%
12%
10%
10%
10%
24%
-9%
8%
19%
8%
16%
29%
19%
5–7%
5–7%
6-8%
4-6%
5–6%
5–6%
3–5%
our technology with a number of new
products launched in the period.
In Spectris Scientific we launched: our
ParticleSeeker product, a smart aerosol
manifold used to monitor air quality in
semiconductor manufacturing; the
Nanosight Pro which provides the quickest,
most accurate, easy to use and install
nanoparticle tracking analysis instrument;
the SERVOPRO DF760E NanoTrace, a dual
moisture and oxygen analyser for ultra-high
purity bulk gases used in the semiconductor
industry; and the FORJTM fusion instrument,
the world’s fastest, safest and most accurate
fusion instrument for sample preparation. In
addition, we made strong progress on our
digital strategy, with around 2,500 customer
instruments now connected to our SMART
Manager cloud-based platform for remote
and proactive instrument monitoring.
In Spectris Dynamics new product launches
included: our COMPACT FSS to further
augment our simulator offering for
automotive customers; a number of major
upgrades to our leading reliability and
durability software; and a record number of
prototypes for our global OEM sensor
customers including: force sensors for
batteries and brakes applications; strain
sensors for fuel cells and electric vehicles; and
torque sensors for robotics and mechatronics.
Our simulation technology continues to gain
recognition with our DiM300 simulator
selected as the 2023 Development Tool of the
Year by Vehicle Dynamics International.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Chief Executive’s review continued
17
our journey towards our medium-term
adjusted operating margin target of over 20%.
I have been particularly delighted to witness
the commitment to the SBS and the progress
we have made across our sites during my
visits throughout the year.
The main objectives of the SBS are to remove
waste, drive efficiency and strengthen
competitiveness as we grow the business.
These activities not only deliver hard financial
benefits, but they also strengthen our
capabilities and create additional capacity,
including investment in innovation and areas
like automation. As reported at the half year,
our focus during 2023 has been to drive
maturity in lean operations across our sites
while continuing to meet our commitments to
customers. In particular, this has meant a focus
on expanding our existing capacity efficiently,
to convert orders into sales, while at the same
time reducing costs and lead times.
During the year, the SBS continued to make a
meaningful contribution to the profitability of
the Group, with benefits realised from
operational excellence initiatives in 2023 in
excess of £10 million. These benefits are
derived from a combination of gross profit
improvement and overhead reduction,
delivered through a range of projects
including: improvements to workflow; layout
and capacity utilisation; freight optimisation;
and increased use of automation.
We commenced our ‘Bronze, Silver, Gold’
certification programme in the year to drive
lean operations across our core operational
metrics of Safety, Quality, Delivery, Inventory,
Productivity. I am pleased to report that at the
end of the year, seven of our sites (out of a
total of 14 priority sites) had achieved Bronze
certification.
Looking ahead, in 2024 we expect a number
of additional sites to achieve Bronze status
and others to make progress towards their
Silver accreditation. We will also continue to
broaden the focus of the SBS to encompass
R&D as well as the enabling functions such as
IT, Finance, HR and Legal.
We have made good progress on the
implementation of our business
transformation programme, enabled by
SAP S/4HANA, focusing on four key areas:
people, process, technology and data. The
programme will deliver simplified and
standardised processes, helping us more
efficiently scale our business, through:
simpler working practices; better customer
experience; enhanced interaction with
suppliers; and a more globally connected and
scalable business. Our approach has been to
adopt the standard SAP configuration
wherever possible, adjusting our business
processes to the system, thereby limiting
customisation and reducing complexity.
Implementation is scheduled to take place in
2024 through a phased rollout with benefits
starting to be realised from 2025.
We made excellent progress on the build out
of our new strain gauge production site in
Porto. The new site, which will become
operational in the second quarter of 2024, will
provide additional capacity to supply OEM
sensors to European and US markets from
Portugal, while our existing site in Suzhou
supports customers across Asia.
Work on the project to build a new, state-of-
the-art facility for our PMS business in
Colorado is progressing well. The new facility
will allow us to continue developing,
manufacturing and servicing products in
Colorado, while providing increased capacity,
improved operational efficiency and a
modern working environment for employees.
Underpinned by our Purpose and our
people
At Spectris, we believe that the way that we
deliver our results is just as important as the
results themselves. We are committed to
creating a sustainable business for all our
stakeholders, ensuring that we prioritise a
culture of long-term growth set on solid
foundations.
For our employees, this means creating a
great place to work, where their safety and
wellbeing is a priority and where they feel that
they belong, are seen and can develop and
grow. For our suppliers and customers this
means shared ethical business practices and
a joint commitment to making the world
cleaner, healthier and more productive.
Looking ahead, we expect R&D spend to
remain at around 8% of sales, with all our R&D
investments expected to return an internal rate
of return of at least 15%. In 2022, we introduced
our vitality index for the first time. This measures
current year revenue from products released
over the previous five years as a percentage of
total revenue in the current period.
The vitality index was 22% by the end of 2023
(2022: 25%) with the decline reflecting a
combination of two factors. First, our decision
to divert engineering resource to redesign
products to navigate input shortages
delaying some of our new product
introduction timescales and second, strong
sales of our established core product portfolio,
which is testament to the strength and
longevity of our technology and leading
market positions. We expect the vitality index
to improve beyond 2022’s level in 2024.
Investing in growth through M&A
We continue to maintain an active pipeline
of potential acquisition targets from early-
stage technologies to bolt-on acquisitions
of varying sizes, through to larger-scale
opportunities. This is an important
component of our Strategy to compound
growth, with acquisitions adding £23 million
of additional sales (2%) in 2023. During the
year, we invested a total of £60 million on
four acquisitions.
In September, Spectris Dynamics completed
the acquisition of MicroStrain Sensing
Systems Business, a leading developer of
inertial and wireless sensing systems, serving
the industrial and aerospace sensing systems
market, to further strengthen our overall
sensor offering.
Spectris Scientific made three investments
to broaden its offering: the x-ray diffraction
product line from Freiberg Instruments
providing complementary solutions to our
existing semiconductor portfolio; a minority
investment in LumaCyte providing further
exposure and deeper insights into the
high-growth cell & gene therapy and vaccine
markets; and the acquisition of Particle
Measuring Technique Ireland Limited (EMS),
a long-established partner and exclusive
distributor of PMS products in the UK and
Ireland, which further strengthens our
regional services offering.
Looking ahead, our strong balance sheet
and active M&A pipeline provide us with
considerable flexibility to continue to
compound growth through targeted
acquisitions.
Operational excellence: the SBS driving
productivity and competitiveness
The deployment of the SBS continues to
expand, delivering operational excellence
and the adoption of a lean mindset across the
Group, as a key productivity component of
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 18
Chief Executive’s review continued
Our people are at the heart of our Purpose
and we are committed to developing our
healthy, high-performance culture. Across
Spectris, we have exceptional leaders, deep
technical experts and visionary thinkers, who
collectively create a diverse and innovative
global team who are passionate about
serving our customers and supporting each
other. I passionately believe that bringing
brilliant people together behind our common
Purpose, underpinned by our Values is the
key to our continued success.
Nurturing a diverse and inclusive working
environment is key to ensuring that our
people thrive. To achieve our full potential, we
need our people to bring their different
backgrounds, experiences and perspectives
to the fore in their work, supported by an
inclusive leadership culture that ensures
everyone feels they belong. Our people are
guiding our approach and we have
developed a number of inclusion groups
across our Spectris Dynamics business
covering areas such as late careers, gender
diversity, parents and our Advocates and
Allies Group, based in the US which support
and promote the views of employees from
diverse backgrounds. The views and feedback
from these inclusion groups is helping to form
and shape our approach to inclusion.
We are proud of the progress we have made
in 2023 to build further gender diversity into
our senior leadership team, increasing the
percentage of women to 28.7% and setting
our ambition to ensure this rises to at least
40% by 2030. In support of this, I am
delighted that Spectris has joined the 25x25
initiative to provide a collective focus on the
development of a diverse talent pipeline in
our industry. We also remain a proud sponsor
of International Women in Engineering Day
which his year, was celebrated in conjunction
with The Spectris Foundation, Young
Professionals and Techgirlz involving over 275
young women from across the UK and US
exploring different career paths in technology
and engineering.
We recognise the importance of developing
ethnic diversity, and other forms of
representation. In 2023, we took early steps
towards the voluntary reporting of ethnic
diversity data and we have set a target to
ensure that 10% of our UK-based leadership
population is ethnically diverse by 2027. While
this is an important first step, with employees
in over 30 countries, our wider ambition is to
ensure that our leadership community fully
reflects and represents our employee base
and the geographies where we operate.
Our healthy, high-performance culture is also
being supported by our global leadership
development programme, Ascend. The
programme is founded on the principles of
inspiring our people, strengthening our
teams and growing our business,
underpinned by our Values and Purpose. We
expect our leaders to cast a strong shadow,
demonstrating the right behaviours and
fostering a culture in their teams of
accountability, aspiration and doing the right
thing, by creating an engaging and inclusive
environment, where people can flourish.
The health, safety and wellbeing of our people
is our priority. We prioritise a safety-first
approach, to our operations, aligned to our
Values. In, 2023 we saw a slight increase in the
number of recordable incidents, with our
Total Recordable Incident Rate (TRIR)
increasing to 0.34 (2022: 0.27). While the
absolute number of incidents remains very
low, these incidents have been thoroughly
investigated by the Group’s Health and Safety
Committee and are attributable to an
increase in minor incidents and the
embedding of our global health and safety
reporting structure. Our goal remains to
reduce our TRIR to below 0.2, which would
represent a truly world-class performance.
We also continue to place great emphasis on
ensuring the wellbeing and mental health of
our people. This includes equipping our
leaders with the know-how to support their
teams in a holistic way through our ‘Time to
Talk’ programme and increasing access to our
Employee Assistance programmes, with over
86% of employees now having access to a
programme.
The positive development of our culture is
visible in the progress made in our annual
Gallup engagement survey. Our engagement
score increased again in 2023, rising to 3.92
(out of 5.00), up from 3.86 in 2022 and 3.72 in
2021. I am very pleased with the progress we
are making and, in particular, the
commitment I can see across the Group to
make engagement an intentional core of our
culture, making Spectris a great place to work.
Our Purpose guides our actions. We are
harnessing the power of precision
measurement to make the world cleaner,
healthier and more productive. In 2021 we
set challenging targets to become Net Zero
across our own operations by 2030 and
across our value chain by 2040. In 2023, we
continued to make strong progress towards
our Net Zero ambition with a like-for-like
reduction of 27% in our scope 1 and 2
emissions, driven through the application of
the SBS principles to energy reduction and
the cost-effective deployment of onsite
renewable energy.
We have also made excellent progress in the
measurement and reduction of our scope 3
emissions, through the expanded use of
EcoVadis to build supplier-specific data and
the development of our product life cycle
assessment protocol at Servomex and PMS.
This progress has allowed us to measure and
report additional supplier specific data for
the first time. This level of granularity is
supporting targeted action, resulting in a 9.5%
reduction in our scope 3 emissions on a LFL
basis compared with 2022.
We are very conscious that one of the biggest
sustainable impacts we can have is through
our supply chain. In 2023, we launched the
new Spectris Supplier Code, which underlines
our commitment to the UN Global Company,
ethical business practices and sustainable
supply chains. The Supplier Code serves as
the foundation of our operations, outlining
the minimum standards we expect from our
valued supply chain partners and how we
would like them to work with us to fulfil our
wider sustainability ambitions.
Beyond our business we are also proud to be
building a legacy. We created the Spectris
Foundation in 2021 through an endowment
of £15 million. The Spectris Foundation
believes that every person should have an
equal right to quality STEM education. To
date, the Foundation has committed over
£1.1 million to STEM education, supporting
over 430 teachers and 43,000 students in 11
countries. The involvement of Spectris
employees in Foundation activities amplifies
the impact of the charitable grants, with over
2,940 hours donated in 2023 and plans in
place to extend volunteering in 2024. Spectris
is committed to the long-term impact of the
Foundation contributing an additional
£1 million in 2023 with plans for a further
£5 million by 2030.
Summary and outlook
The Group’s resilience, leading product
portfolio and broad end market exposure,
combined with a strong self-help story,
provides confidence in the Group’s ability to
navigate an uncertain macroeconomic
environment this year.
We expect to deliver another year of further
progress in 2024, including margin expansion,
after taking into account the impact of the
Red Lion disposal. Progress is expected to be
weighted towards the second half reflecting
the strong performance of the Group in the
first half of 2023, and an improving outlook in
a number of key end markets.
Andrew Heath
Chief Executive
28 February 2024
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Case Study
19
Customer:
CPH2 / SGS
Servomex 2200 Oxygen Analyzer
plays important role in
green hydrogen production
Global demand for Hydrogen is expected to
increase from 87 million metric tons (MT) in
2020 to over 600 MT by 2050. Within this
market, the green hydrogen (ultra-low CO2
emissions) sub-sector is forecast to expand at
a compound annual growth rate (CAGR) of
39.5% from 2022 to 2030 as the world seeks
cleaner and sustainable energy alternatives.
Servomex is playing a crucial role in the
expansion of green hydrogen through the
development of advanced gas analysis
technologies that enhance the efficiency and
reliability of hydrogen production processes.
With economies of scale and the reducing
cost of electrolysis—the production process
by which green hydrogen is produced is
rapidly improving.
This transformation in the economic viability
of green hydrogen, is making it increasingly
competitive with conventional hydrogen
production methods. Through precise
monitoring and control of gas composition,
Servomex aids the optimisation of the
electrolysis process, ensuring a high purity of
green hydrogen output. This not only
improves the overall efficiency of hydrogen
production but also aligns with the industry’s
commitment to reducing carbon emissions
as the demand for green hydrogen continues
to rise.
Servomex was pleased to supply the versatile
Servomex 2200 Oxygen Analyzer to our
customer CPH2 via our Channel Partner SGS.
This analyzer is an excellent addition to their
state-of-the-art and green hydrogen
production system.
CPH2, who manufactures the unique 1 MWatt
Membrane-Free Electrolyser, selected the
Servomex 2200 Analyzer for its class-leading
specification for measuring oxygen in
hydrogen to enhance their technology’s
efficiency and safety processes.
The Servomex 2200 analyser is approved for
the measurement of oxygen, including
enriched oxygen (>21%), in hydrogen in
hazardous areas. The CPH2 electrolysers are
used to decarbonise energy systems,
replacing diesel back-up systems and using
excess wind and solar energy to generate
hydrogen to power equipment, machinery
and transportation (forklift trucks, buses,
airport ground support equipment).
Servomex is playing a crucial role in
the expansion of green hydrogen
through the development of
advanced gas analysis technologies
that enhance the efficiency and
reliability of hydrogen production
processes.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 20
Our Business Model
Our business model is driven by our Purpose
and built on our Values
Purpose-led
Delivered through our business model
Our Purpose
We are harnessing the power
of precision measurement to
make the world cleaner,
healthier and more productive.
Our Commitment
to being a sustainable
business partner, investment
proposition and employer.
Great businesses
Asset-light businesses focused on
premium, precision measurement
solutions and industry-leading domain
expertise, aligned with our Purpose.
Investing in growth
Disciplined capital allocation for the
benefit of all stakeholders – investment
in growth through R&D and M&A.
Read more about our businesses
on pages 28 to 39
Read more about R&D and M&A
on pages 24 and 25
Structural growth markets
Aligned with attractive, sustainable,
structural growth markets with high
barriers to entry.
Operational excellence
Leveraging the Spectris Business System
(SBS), business improvement projects and
our high-performance culture.
Read more about our growth markets
on pages 10 and 11
Read more about operational excellence
on page 44
Customer centricity
Solving customer challenges with leading,
differentiated solutions, equipping them
to make the world cleaner, healthier and
more productive.
People and culture
Purpose-led, healthy, high-performance
culture with a clear ambition to create a
positive and lasting impact to the plant
and society.
Read more about our people
on pages 54 to 57
Underpinned by
Our Values
Be True – we believe in absolute integrity.
It’s how we win for stakeholders, the
environment and each other.
Own It – we believe in teamwork and
keeping our promises. It’s how we build
our brands and businesses.
Aim High – we believe in being bold and
positive. It’s how we perform at our best
and achieve greater success.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Our Business Model continued
21
Creating value beyond measure for all our stakeholders
Our customers
We build strong,
collaborative
customer relationships,
underpinned by a
deep understanding
of our customers’
businesses.
Our people
We ensure that our
culture openly reflects
our values and meets
the expectations of
our people. We are
committed to creating
the best possible
working environment
and culture where our
employees feel included,
engaged and can thrive.
Our value chain
We believe that our
suppliers should have
the opportunity to
benefit from their
relationship with us,
working together with
a shared purpose
and Values.
Our society
We are committed to
creating a positive legacy
in our communities and
for the next generation.
The Spectris Foundation
will enhance and
improve our charitable
giving to support quality
access to a STEM
education.
Our shareholders
We work to ensure the
long-term success of
the Group to deliver
enhanced shareholder
value through our
financial performance,
capital distributions and
our focus on long-term
value creation.
Our planet
We recognise that we
have a role to play in
tackling environmental
degradation and climate
change. Our products
and services reduce
our customers’
environmental impact.
We are also making
strong progress in our
ambition to become
Net Zero across our own
operations by 2030 and
across our value chain
by 2040.
For more information on our
approach to sustainable growth,
see the Sustainability Report
on pages 52 to 77
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 22
Our strategy
Our Strategy
for Sustainable
Growth
There has never been a better time,
or a greater need, to harness the
power of precision measurement to
make the world cleaner, healthier
and more productive.
Since 2019, we have repositioned Spectris
as a leading sustainable, compound-growth
business, delivering value beyond measure
for all our stakeholders.
In October 2022, we announced our plans
and the outlook for the next stage of our
journey – our Strategy for Sustainable Growth.
Our performance targets
(2022 – 2027)
Organic sales growth
6–7%
through the cycle
Adjusted operating margin expansion
20%+
Adjusted cash conversion
80–90%
ROGCE
Mid-teens
Net Zero
Net Zero across our
operations by 2030
Net Zero across our
value chain by 2040
Employee engagement
Gallup GrandMean score
of 4.06 by 2025
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 23
Great businesses
Structural growth markets
Customer centricity
We are owners of world-class precision measurement
businesses with industry-leading domain expertise.
Our Scientific and Dynamics Divisions are fully aligned
with our Purpose to make the world cleaner, healthier
and more productive.
We are concentrated in high-growth end markets.
Our end markets demonstrate structural growth,
underpinned by sustainability themes and as such
have strong CAGRs through the cycle, underpinning our
organic growth.
Our focus on solutions adds value throughout our
customers’ workflows. Our direct relationship drives
customer-backed innovation, informing our research
and product development strategy such that we
intercept our customers' needs, allowing us to move
faster and deliver greater value.
Read more in our Division reviews
on pages 28 to 45
Read more about our markets
on pages 10 and 11
Read more in our customer case studies
on pages 19, 31 to 33, 37 to 39, 45 and 71
Investing in growth
Operational excellence
People and Culture
We leverage our strong balance sheet to deliver growth.
We are driving organic growth through investment in R&D
at 7.8% of revenue, innovating and problem solving with
the customer in mind.
We are compounding this growth through investment in
M&A to strengthen and expand our portfolio to add value
across our customers’ workflows.
We are leveraging the SBS to continuously drive
operational excellence to improve productivity. We are
investing in new systems to improve processes and we
continue to refine our lean operating model to remove
structural inefficiencies and deliver our margin ambitions.
We have built a purpose-led, healthy, high-performance
culture with a clear ambition to create a positive and
lasting impact to the planet and society.
Read more in the Chief Executive’s review on pages 12 to 18
Read more in our Division reviews
on pages 28 to 45
Read more on our Culture
on pages 54 to 58
Our progress is underpinned by our investment in
Our People
Read more about Our People
on pages 54 to 57
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 24
Investing in growth
Research & development
High levels of customer intimacy
drives customer-back innovation,
informing our research and product
development strategy such that we
intercept our customer needs for
the future.
Our recent strong growth has been
underpinned by new and enhanced products
which have helped deliver market share
gains. We employ over 1,300 engineers,
approximately half of which are in software.
Over the last three years we have increased
our R&D investment as a percentage of sales
from 6% to around 8% with the proportion of
engineering time now spent on new
products increasing to around 60%. Going
forward, we plan to maintain investment at
or above 8% of revenue.
R&D investment
£108.1m
R&D investment as a percentage
of sales
7.5%
(2022: 7.8%)
Examples of latest product launches in 2023
Spectris Scientific
• Maintaining leadership in XRF
• Strengthening XRD offering
• Expanding semiconductor
metrology offering
• Next generation particle
analysers and counters <10nm
Nanosight Pro – Nanoparticle
Tracking Analysis instrument
NanoAirTM10 Particle Counter
and Particle Seeker
FORJ™ fusion instrument for
sample preparation
• Remote monitoring
• Integrated cloud services and
analytics
• Combining AI with
instruments
• Quickest, most accurate, easy to
• Condensation particle counter and
• FORJ is designed to meet the
use and install, Nanoparticle
Tracking Analysis instrument
• Powered by machine learning,
enables automated
measurements, and provides the
highest quality size and
concentration data for both the
light scatter and fluorescence
analysis
seeker
• Used in ultra-clean environments
inside semiconductor process
tools and equipment
• 83% smaller than competitor
products
• Provides 24/7, 365-day continuous
operation without the need for
maintenance or user intervention
highest material quality standards
for elemental analysis
• Delivers the highest levels of
robustness, productivity, and
superior-quality results
• User-friendly instrument is suitable
for full laboratory integration
Spectris Dynamics
• Enhanced virtual test
solutions
• Simulation and data
management software
• Software/hardware-in-
the-loop
• Reliability and durability
software
• Electric powertrain testing
• Data acquisition ecosystem
• Smart and OEM sensors
COMPACT Full Spectrum
Simulator (COMPACT FSS)
• Broadens and strengthens our
simulator portfolio
• Powered by a VI-grade AutoHawk
real-time computer
• Provides highly accurate motion,
vibration and sound in a small
footprint
• Enables human-in-the-loop
simulation
OEM Sensors
• Delivered 55 OEM customer
prototypes including: force sensors
for batteries and brakes
applications; strain sensors for fuel
cells and electric vehicles; torque
sensors for robotics; and
mechatronics
New smart sensors
• Introduced newly developed
smart force sensors linked to a
standard industrial interface
• Enabling simplified machine
design and decisions to be made
at the point of measure
• Improved efficiency and simplified
• Provides strong foundation for
machine operation
future sales growth
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 25
Investing in growth continued
Mergers & acquisitions
Compounding growth through M&A is a key part
of our strategy. We maintain an active pipeline
of acquisition targets across the spectrum, from
early-life technologies, to bolt-ons of varying sizes,
through to larger-scale opportunities.
We take a disciplined approach – ensuring there is a clear
industrial logic and financial rationale, consistent with our
capital allocation policy. Since 2018, we have acquired 12
businesses for a total net consideration of £360 million.
We are targeting opportunities in pharmaceutical & life
sciences, advanced materials, metrology, sensors,
electrification, software and advisory services.
Acquisition
MicroStrain
2023: £29.1 million
Leading developer of inertial and
wireless sensing systems
supporting industrial
automation and development of
new robotics, logistics,
unmanned vehicles and mobility
applications
Acquisition
Creoptix
2022: £37.3 million
Provides cutting-edge tools for
molecular interaction analysis
through its WAVE system of
next-generation bioanalytical
instruments
Benefits of acquisition
• Expands instrumentation
and services capabilities
• Strengthens position in small
molecule pharmaceutical
development
• Grows capabilities in
biopharmaceuticals
End markets and
applications served
• Pharmaceutical/
life sciences
Benefits of acquisition
• Strengthens piezo-electric and
MEMS offering
• Expands North American
• Discovery and development of
presence
new drug products
• Enhances customer offering
• Accelerates product
development
Image credit: Blue Origin
Product-line acquisition from
Freiberg Instruments
2023: £13.0 million
Acquisition of the x-ray
diffraction product line and
crystal orientation metrology
tools
Acquisition
Dytran
2022: £70.5 million
Leading designer and
manufacturer of piezo-electric
and MEMS-based
accelerometers and sensors for
measuring dynamic force,
pressure and vibration
End markets and
applications served
• Space, aerospace, industrial
and automotive industries
• Product development testing
and embedded monitoring
solutions
Investment
LumaCyte
2023: £7.8 million
Minority investment in a
bioanalytic instrumentation
company producing label-free,
single cell analysis and sorting
instrumentation
Benefits of acquisition
• Strengthens sensor offering
• Helps penetrate rapidly growing
automation and smart
manufacturing markets
• Expands North American
presence
End markets and
applications served
• Aerospace and defence
• Industrial automation
• Robotics, logistics,
autonomous vehicles
Benefits of acquisition
• Complements existing
semiconductor portfolio
• Helps respond to the industry
requirement to improve yield
and performance
End markets and
applications served
• Semiconductors
• Wafer metrology/crystal
orientation
Benefits of acquisition
• Provides Spectris with further
exposure into the high growth
cell & gene therapy and vaccine
markets
End markets and
applications served
• Life sciences/pharmaceuticals
• Cell and gene therapy and
vaccine markets
• Allows LumaCyte to build sales
and applications teams and
enhance its manufacturing
capabilities and technology base
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 26
Key Performance Indicators
Financial
Measuring our
performance
Like-for-like sales growth (%)
Adjusted cash flow conversion1 (%)
2023
2022
2021
2020
-10.7
2019
10.1
9.7
13.6
0.4
2023
2022
2021
2020
2019
103
74
94
91
141
We monitor progress against the delivery of
our strategic goals using both financial and
non-financial key performance indicators (KPIs).
Our Strategy for Sustainable Growth is centred on long-term
value creation. Seven of our KPIs are directly linked to
remuneration under the 2023 Remuneration Policy. For
further details, see the Directors’ Remuneration Report on
pages 102 to 123.
A number of the KPIs are adjusted operating metrics, as
we believe these provide a more representative view of our
underlying performance because they exclude foreign
exchange movements and the impact of acquisitions and
disposals. See the appendix to the Consolidated Financial
Statements for a reconciliation between adjusted and
statutory items.
The Directors’ Report (pages 124 to 127) contains the statement
on non-financial information and provides an index for where
information relating to non-financial matters can be found.
1. In 2022, following the divestment of the Omega business and its
classification as a discontinued operation, 2022 and 2021 data
has been restated to only show continuing operations.
Link to Strategy
Great businesses
Structural growth markets
Customer-centricity
Investing in growth
Operational excellence
Link to remuneration
LFL sales growth
LFL sales growth is a measure of how our R&D and other investments
help to grow our business organically, i.e. excluding the effects of
currency translation and acquisitions or divestments.
Performance
In 2023, sales were £1,449.2 million,
a 10% increase on a LFL basis
compared with 2022, driven from
1.5% volume and 8.0% pricing.
Link to strategy and objectives
We are customer focused and
target attractive end markets
where we are best placed to
drive compound growth and
profitability. Our aim is to achieve
through-cycle growth of 6-7%.
Link to remuneration
30% of annual bonus opportunity.
Cash conversion
Adjusted cash conversion represents an effective measure of the quality
of our earnings after investments in capital expenditure. Adjusted cash
conversion is defined as adjusted cash flow as a percentage of adjusted
operating profit.
Performance
Adjusted cash conversion was
103% in 2023, an increase of 29pp
compared to 2022. With greater
adjusted cash flow being
generated from the increased
adjusted operating profit, the
improvement in adjusted cash
conversion principally results from
a favourable working capital
movement, mainly attributable to a
reduction in trade receivables, and
lower capital expenditure.
Link to strategy and objectives
We have an asset-light business
model and our strong adjusted
cash generation enables us to
reinvest in our businesses and
provide capital returns to our
shareholders. Our aim is to deliver
a high level of adjusted cash
conversion every year, in the
range of 80-90%.
Link to remuneration
20% of annual bonus opportunity.
Adjusted operating margin1 (%)
Growth in adjusted EPS1 (%)
2023
2022
2021
2020
2019
18.1
16.8
16.3
13.0
15.8
2023
2022
2021
2020
-33
2019
25
26
26
2
Adjusted operating margin
Adjusted operating margin is the primary measure of improving
profitability of our business and is defined as adjusted operating profit
as a percentage of sales.
Adjusted EPS growth
Adjusted EPS is the ratio of adjusted earnings for the year to the
weighted average number of ordinary shares outstanding during the
year, excluding certain items.
Performance
In 2023, the adjusted operating
margin improved to 18.1%, an
increase of 130bps from 16.8% in
2022. This reflected the higher
sales volumes and a progressive
pricing policy that remained
ahead of inflationary cost
pressures on materials, labour
and overheads, and improved
productivity.
Link to strategy and objectives
Our aim is to deliver strong
operational leverage and drive
operating margin expansion. As
we grow, our immediate target is
to achieve an adjusted operating
margin of 18% in the near-term
and >20% in the medium-term.
Link to remuneration
30% of annual bonus opportunity.
Performance
Adjusted EPS increased 25%
to 199.7p, primarily reflecting an
improvement in adjusted profit
before tax, and as a result of
the lower share count following
the Group’s £300 million share
buyback programme completed
in 2023 and the commencement
of the £150 million share buyback
programme on 13 December 2023.
Link to strategy and objectives
We are focused on improving
profitability as we grow. Our aim is
to achieve year-on-year growth in
adjusted EPS.
Link to remuneration
33.3% of base LTIP award.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 27
Key Performance Indicators continued
Non-financial
ROGCE1 (%)
2023
2022
2021
2020
2019
18.5
16.0
9.9
13.2
13.5
Energy efficiency (MWh per £m revenue)
Total recordable incident rate (TRIR)
2023
2022
2021
2020
2019
48.9
58.2
73.7
72.0
92.2
2023
2022
2021
2020
2019
0.34
0.27
0.32
0.13
0.24
ROGCE
ROGCE calculated as adjusted operating profit from continuing and
discontinued operations for the last 12 months divided by the average
opening and closing gross capital employed. Gross capital employed is
calculated as net assets excluding net cash and excluding accumulated
amortisation and impairment of acquisition-related intangible assets
including goodwill.
Performance
ROGCE was 18.5% in 2023, a
notable increase from 16.0% in
2022, primarily reflecting the
increase in adjusted operating
profit, as well as a reduction in
the Group’s capital base as a
result of the divestments.
Link to strategy and objectives
ROGCE measures how efficiently
we generate profits from
investment in our businesses,
both organically and via
acquisition. Our aim is to improve
ROGCE year-on-year.
Link to remuneration
33.3% of base LTIP award.
Energy efficiency
Energy efficiency makes a significant contribution to environmental
sustainability and helps us to reduce our operating costs. This KPI
measures the evolution of the energy efficiency of the Group, including
the impact of portfolio changes on our efficiency and therefore we do
not restate prior year emissions for divestments here.
Total recordable incident rate
We are committed to ensuring the health, safety and wellbeing of
our people. We measure our progress against the TRIR, a standardised
safety calculation defined by the US Occupational Safety and Health
Administration which provides a clear measure of a company’s safety
performance.
Performance
In support of our Net Zero
ambition, Energy efficiency
improved to 48.9 in 2023, from
58.2 in 2022. The decrease is
attributable to the ongoing
impact of energy efficiency
measures put in place at material
operating sites combined with
higher revenue.
Link to strategy and objectives
Our sustainability strategy sets
out key commitments around the
environment. We monitor our use
of the sources of energy with the
aim of reducing our carbon
emissions and improving our
energy efficiency to support our
Net Zero ambition ‒ an 85%
absolute reduction in scope 1 and
2 emissions and a 42% absolute
reduction in scope 3 emissions
by 2030.
Performance
In 2023, the TRIR was 0.34, an
increase from 0.27 in 2022. This
increase has been thoroughly
investigated and is attributable
to the increased use of reporting
tools and a slight increase in
minor incidents such as slips,
trips and falls.
Link to strategy and objectives
High safety standards protect
our people and help drive
sustainable growth through
operational excellence. Our aim
is to reduce accidents and injuries
at our sites to as low a level as
reasonably practical. Further
details of our approach to health
and safety are set out on page 60.
Employee engagement (GrandMean)
2023
2022
2021
3.92
3.86
3.72
Scope 1 and 2 emissions (tonnes CO2e)
2023
12,144.1
2022
2021
2020
2019
17,546.0
31,703.0
43,111.0
52,740.0
Employee engagement
An engaged workforce has a significant positive effect on individual and
team performance. We are committed to building a culture where our
people feel inspired to Aim High and work together to deliver strong
business performance.
Performance
We launched our first annual
global engagement survey with
Gallup in 2021 . We have since
implemented a number of
high-impact initiatives to make a
real difference to how our people
connect with their work and with
each other. This has seen our
GrandMean score improve from
an initial score of 3.72 out of 5.00
in 2021 to 3.92 out of 5.00 in 2023.
Link to strategy and objectives
Improving employment
engagement is a strategic
priority and we are committed
to making Spectris a truly
inspiring place to work. Our aim
is to improve our engagement
score by >0.14 every year, in line
with Gallup best practice.
Link to remuneration
16.65% of base LTIP award.
Scope 1 and 2 emissions reduction (market-based)
We are committed to our ambition to reach Net Zero across our scope 1
and 2 emissions by 2030.
Link to strategy and objectives
We are committed to being a
leading sustainable business.
To build our relevance to all our
stakeholders we must support
their Net Zero ambition through
the delivery of our own emission
reduction targets.
Link to remuneration
16.65% of base LTIP award.
Performance
in 2021, we launched our ambition
to become Net Zero across our
own operations by 2030 and across
our value chain by 2040. Since
launching our ambition we have
worked to address our own
emissions through a combination
of energy efficiency assessments,
employee-led activities and the
transition to renewable energy
sources. The reduction in our
emissions since 2019 reflects
changes to the energy efficiency of
our portfolio of businesses and the
impact of our Net Zero strategy.
Link to Strategy
Great businesses
Structural growth markets
Customer-centricity
Investing in growth
Operational excellence
Link to Remuneration
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 28
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Our Businesses
Making
the invisible...
visible
Spectris Scientific
Leader in advanced material measurement and characterisation.
“We are well positioned to
outperform in high-growth
end markets, aligned to clear
sustainability trends.”
Mark Fleiner
President, Spectris Scientific
Continued strong growth and sustainable
margin performance
Spectris Scientific delivered a strong financial
performance in 2023, with sales growth of 7%
to £704.2 million (2022: £657.8 million) and a
double-digit increase in adjusted operating
profit. LFL sales growth was 12% after taking
into account the £17 million (+3%) net impact
of acquisitions and disposals (primarily the
disposal of the remaining element of CLS and
adverse foreign exchange movements of
£13 million (+2%).
We saw strong sales growth across all key end
markets, with the exception of life sciences,
which was impacted by the earlier
normalisation in customer demand after
strong growth in prior periods. Sales grew
across all regions with growth strongest in
Asia, including China.
Orders were 6% lower (3% lower on a LFL
basis) than the prior year, with good demand
growth in materials and academia, offset
by both life sciences and semiconductor.
Regionally, order growth in the US and flat
demand in Europe was offset by lower orders
in Asia.
Adjusted operating profit increased by
11% (13% LFL) to £155.2 million (2022:
£140.0 million) reflecting the strong sales
growth and good operational performance,
with adjusted operating margin improving by
70bps to 22.0% (2022: 21.3%). On a LFL basis,
the increase in adjusted operating margin
was 10bps, with higher sales volumes largely
offset by cost inflation.
Statutory operating profit was 5% higher
at £124.4 million (2022: £118.3 million) after
including £10.7 million of additional costs
related to the investment in our new
ERP system, as part of the business
transformation project. Statutory operating
margin was 17.7% (2022: 18.0%).
Strongly positioned in high-growth end
markets supported by sustainability
trends
We are well positioned in high-value,
critical-to-quality areas where precision
measurement, domain expertise and
analytics are valued by our customers
throughout the workflow. We are market
leaders reflecting our broad solution portfolio,
strong domain knowledge for material
analysis and characterisation, as well as our
deep customer relationships. We are a key
facilitator of customer innovation, supporting
opportunities across the material life cycle
from extraction, through functional
performance, sustainability, and recycling.
Spectris Scientific is focused on the high-
growth end markets of life sciences, material
sciences (primary and advanced materials),
semiconductors and academia, that are
benefiting from a number of structural
growth trends:
1. Life sciences – ageing populations,
population growth, personalised medicines
and reshoring.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023
29
Our businesses continued
3
4
1
2
Sales by location (%)
1 Asia
2 Europe
3 North America
4 ROW
46
25
22
7
1
5
4
2
3
Sales by end market (%)
1
Life sciences/pharmaceutical
34
2 Materials
3 Electronics and semiconductor
4 Academic research
5 Other
19
18
14
15
sales growth in our aerosol, liquid, and gas
particle counters to customers in support of
the buildout of new semiconductor
fabrication plants.
We saw good sales growth in our MRD XL
products in the compound semiconductor
market, especially power electronics. The
acquisition of the XRD product line assets
from Freiberg Instruments in the second half
of 2023 further enhances our capabilities and
solutions in this area.
While order intake was lower in 2023 against
a strong comparator as demand normalised,
our pipeline remains robust. In 2024, we
expect order levels to pick up in the second
half as the industry returns to a more normal
business cycle.
The multi-year outlook for semiconductor
remains positive, driven by fabrication plant
expansion and technology advancements
driven by a number of sectors such as
automotive, artificial intelligence and
compound semiconductors. We are also
encouraged by positive customer feedback in
relation to recent product launches including
our NanoAir 10 particle counter for use in
ultra-clean environments.
Academia
We are well positioned to take advantage
of the academic research that feeds into
our end markets, with a strong brand built
on high-precision measurement and
scientific credibility.
2. Primary materials – minerals for the energy
transition, lower carbon building materials
and increased recycling.
3. Advanced materials – batteries and power
electronics for the energy transition, supply
chain security and advanced manufacturing
technologies.
4. Semiconductors – electrification of
mobility, reshoring of manufacturing
including US and EU Chips Act, increase use
of personal devices.
Life Sciences
LFL sales during the period were somewhat
lower than the prior year, reflecting the earlier
normalisation of customer ordering patterns
through the year after an exceptionally strong
performance in 2021 and 2022.
In particle characterisation, we saw good
sales growth in laser diffraction driven by
small molecule research and development,
particularly in the US and India. This was more
than offset by lower sales in nanometrics into
Biologics, after a very strong performance
over the last two years. Sales into aseptic
pharmaceutical manufacturing were broadly
flat in our PMS business, with strong demand
in Europe offset by other regions. We have
been encouraged by growth in our advisory
services driven by our strong offering and
recent changes in the regulatory environment.
After a period of demand normalisation in
2023 where order intake was lower than the
prior year, we anticipate demand to remain
broadly flat in the first half of 2024, returning
to growth in the second half.
The outlook over the medium-term remains
positive, with growth in life sciences
underpinned by a number of structural
trends including ageing and expanding
populations, the onshoring of manufacturing
and the need to develop new medicines and
treatments.
Materials
Primary materials
LFL sales grew across all regions, with
particularly strong growth in Asia
predominantly driven by mining and
minerals. We saw strong sales of our x-ray
systems into our petrochemical, polymer and
building material customers, driven by their
need to become carbon neutral, with our
products providing solutions in areas like
production efficiency and recycling. Our XRF
and XRD systems, including our Zetium,
Epsilon, Aeris, and Empyrean product lines
are used by customers to analyse materials
for elemental properties and structural
characteristics.
We saw continued order momentum in
2023, growing the order book to record levels,
providing a positive outlook for 2024.
Advanced materials
We delivered very good LFL sales growth in
2023 reflecting our strong order book as we
entered the year and robust demand, driven
by a number of structural growth trends.
We support our customers to meet their
challenges through a range of solutions,
including our laser diffraction products for
researching and developing the next
generation of battery materials as well as
quality control, and we have also seen
increased interest in our online process
solutions, both for batteries and hydrogen
fuel cells. Similarly, we saw an increase in our
x-ray diffraction sales, especially in China,
partly driven by the government investment
schemes supporting universities and research
laboratories in the first half of 2023.
Looking ahead, the outlook for advanced
materials remains positive with continued
investment in new energy sources such as
hydrogen, the enhanced electrification of
mobility, growing applications for power
electronics and the onshoring of
manufacturing, all of which underpin the
development of new technologies and
customer R&D.
Semiconductor
Sales into semiconductor and electronics
customers grew strongly across all regions,
reflecting the strength of our order book at
the start of the year and solid underlying
demand. Within semiconductor
contamination monitoring, we saw strong
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 30
Our businesses continued
In 2023, we delivered very strong LFL orders
and sales growth driven by North America
and Asia. We have benefited from strong
demand from universities and research
organisations for our XRD systems, to support
materials research and analysis for batteries,
and our MicroCal product range used in a
number of applications from research to the
discovery and development of small molecule
drugs, biotherapeutics and vaccines.
Helping solve customer challenges
Spectris Scientific provides critical
insights and domain expertise to help our
customers find solutions to their most
complex challenges. Our customer value
proposition extends far beyond supplying
our leading products.
In advanced materials, the increased focus on
energy transition and battery development is
creating a number of opportunities. With
energy systems fuelling every aspect of our
modern life, from cell phones to electric cars
and even space travel, achieving energy that
is clean, renewable and reliable, requires the
development of better batteries and fuel cells.
A collaboration in the US between the
University of Pittsburgh and Spectris is
enabling researchers to do just that. Using
data and insights drawn from our Empyrean
x-ray diffraction technology, the team at
Pittsburgh are working towards a series of
ambitious goals to improve the power,
efficiency and cost-effectiveness of batteries.
In primary materials, we secured a major
order from a leading building materials
producer in Asia for a measurement and
analysis solution based on our leading XRF
Zetium and XRD Aeris technology comprising
30 separate systems. This order reflects our
proven technology and application expertise
demonstrated in previous projects with
our systems providing better measurement,
speed and greater operational stability as
well as a better user experience than
the competition.
In pharmaceuticals, we continued to
strengthen our partnership with QILU
Pharmaceutical, a leading manufacturer of
finished formulations and active ingredients
in China, with a significant order for our
Mastersizer and Zetasizer products across
multiple sites. As well as being recognised for
our leading particle characterisation
technology, this order reflects our strong
applications expertise and aftermarket
support including superior service support
and product training.
Investing for growth: R&D is driving
growth and market share gains
To drive growth, we have increased
investment in R&D to both enhance the
performance of existing products and
develop new platforms, along with software,
services and analytics being key areas of
focus. In 2023, we introduced a number of
new products to the market.
The Nanosight Pro provides a best-in-class,
simple and rapid solution for nano and
biomaterials characterisation for use in life
sciences and pharmaceutical development.
The combination of advanced engineering
and a blend of smart features ensures
measurements are efficient, quick and
accessible. Powered by machine learning,
our Xplorer software enables automated
measurements and provides the highest
quality size and concentration data while
connection to SMART Manager assures
robustness and minimises downtime.
Our ParticleSeeker product, a smart aerosol
manifold used to monitor air quality in
semiconductor manufacturing used in
conjunction with the NanoAir10 nanoparticle
counter, provides multiple sample locations
ideal for applications requiring broad
contamination monitoring in the cleanest
and most confined spaces in a
semiconductor manufacturing facility.
And in the FORJ™ fusion instrument, we
have developed the world’s fastest, safest and
most accurate fusion instrument for sample
preparation for x-ray fluorescence supporting
elemental analysis. Based on our expertise in
x-ray fluorescence, inductively coupled
plasma analysis, sample preparation, and the
entire analytical chain, FORJ is designed to
meet the highest material quality standards
for elemental analysis.
M&A
During the year, we completed three
acquisitions/investments to augment our
capabilities and compound growth in
the future.
We acquired the x-ray diffraction product
line from Freiberg Instruments for a total
consideration of up to £13.0 million. The
acquisition of crystal orientation metrology
tools provides complementary solutions to
our existing semiconductor portfolio
allowing us to further respond to the
industry requirement to improve yields
and performance.
We took a minority investment of £7.8 million
in LumaCyte Incorporated, a bioanalytic
instrumentation company, providing
further exposure and deeper insights into
the high growth cell & gene therapy and
vaccine markets.
The acquisition of Particle Measuring
Technique Ireland Limited, a long-established
partner and exclusive distributor in the UK
and Ireland of Particle Measuring System’s
micro-contamination products for £6.4
million, further strengthens our regional
services and aftermarket offering.
Operational excellence
We continue to leverage SBS to improve
productivity and drive operational excellence
across the Division. During the year we
completed a number of projects delivering
tangible financial benefits as well as
promoting increased engagement across
our sites.
In Malvern Panalytical, our ‘Land and
Expand’ upselling programme drove
additional sales of £4 million to existing
customers. A project to extend the life of
a key component in our x-ray diffraction
instruments delivered £0.3 million of benefits
in the year and improved cleanroom
capacity and layout at our Almelo site in the
Netherlands delivered a 20% increase in
output and £0.5 million of benefits.
During the year we adopted the ‘Bronze,
Silver, Gold’ certification programme to drive
lean operations as measured by a number of
core metrics, with two of our sites, Zhuhai,
China and Malvern, UK achieving Bronze
certification in 2023.
We have made good progress in our
business process transformation programme.
In 2024 we will implement a series of
more simple, common and scalable global
processes supported by the introduction of
a new ERP solution. The new solution will
provide improved visibility and deliver a
number of significant benefits to be realised
from 2025 onwards.
Summary
Spectris Scientific is an excellent business.
We provide critical materials insights
through our instruments, data science and
technical expertise. We are well positioned
to outperform in high-growth end markets,
aligned to clear sustainability trends. In
2024, we will continue to work closely
with customers to innovate and solve
their challenges.
Spectris Scientific
Statutory sales (£m)
Adjusted operating profit1 (£m)
Adjusted operating margin1 (%)
Statutory operating profit (£m)
Statutory operating margin (%)
2023
704.2
155.2
22.0%
124.4
17.7%
2022
657.8
140.0
21.3%
118.3
18.0%
Change
LFL1 change
12%
13%
10bps
7%
11%
70bps
5%
(30bps)
1. This is an alternative performance measure (APM). APMs are defined in full and reconciled to the reported statutory
measures in the Appendix to the Consolidated Financial Statements.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Case Study
31
Customer:
MIP Discovery
Bringing speed and simplicity
to analytical workflows
NanoSight Pro
Early detection of illnesses including cancers
and infectious diseases like COVID-19 enables
us to prioritise critical care for those most at
risk. Easy, point-of-care monitoring and
diagnosis help reduce community spread
and strengthen public health measures.
Revenue generated from the point-of-care
diagnostics market reached $45.4 billion in
2022, is growing at a CAGR of 10.7%, and is
expected to reach $75.5 billion by 20271.
At MIP Discovery in Bedford, UK, Research
Scientist Oliver Huseyin and his colleagues
are using Malvern Panalytical technologies
including the new NanoSight Pro
Nanoparticle Tracking Analyzer to develop
innovative alternatives to biosensor-based
testing devices, with Molecularly Imprinted
Polymers (MIPs) at their core. NanoMIPs
are ‘smart’ polymers, often around 40 nm –
50 nm in size, created to specifically target
proteins, peptides, and small molecules of
interest, including viral particles, antigens on
the surface of tumour cells, or markers for
particular conditions including heart failure.
As MIP Discovery moves into Cell & Gene
Therapy applications, these biosensors will
help improve the quality of advanced
therapies, further demonstrating their utility.
Biosensors currently contained in traditional
diagnostic devices require a constant supply
of effective antibodies – often hampered
by time, cost, instability, and often ethical
considerations. MIP Discovery is leaving
behind biological systems and using
polymer chemistry to build synthetic sensor
molecules for use in innovative new
diagnostic devices. This should also help
enable continuous biosensors deployed over
a number of hours or days.
The MIP Discovery Team meets the
NanoSight Pro
A key challenge for the MIP Discovery team is
measuring the size of the nanoMIPs they are
developing – this is where the NanoSight Pro
comes in.
The NanoSight Pro has delivered many
advantages to the team. These benefits relate
to the robustness of the hardware, and the
alignment of the instrument’s software with
that of their other key Malvern Panalytical
instrument, the Zetasizer. The similarities
between the two mean that users can
transfer easily between both systems, saving
time and expanding the skillset of the team.
In addition, Oliver was positively surprised by
the ease of delivery, installation and first
measurements, all enabled by the Malvern
Panalytical Self-Install Program. The team
has seen a dramatic uplift in the speed of
results analysis with the NanoSight Pro – this
time-consuming work has been reduced up
to tenfold, freeing up valuable scientist
time and enabling more hands-on time at
the lab bench.
1. www.marketsandmarkets.com/Market-Reports/
point-of-care-diagnostic-market-106829185.html
“The NanoSight Pro is quick, easy to use, and
gives us the guidance we need to make sure that
we’re getting the right results first time. This also
means we’re wasting less sample because we
don’t have to play around with concentrations
and get the right thing after 5 or 6 runs – it’s right
the first time we measure it.”
Oliver Huseyin
Research Scientist, MIP Discovery, Bedford, UK
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 32
Case Study
PMS: playing
a pivotal
advisory role
Particle Measuring Systems offers specialised advisory
services focused on contamination control, designed to
assist with diverse operational challenges. The team are
equipped with a wealth of background, education, and
industry expertise and are able to provide guidance at
every stage of a customers process.
Whether it involves addressing
non-compliance issues, establishing
new policies, or training employees,
the advisory services aim to
navigate and enhance customers’
contamination control efforts.
The team engage in ongoing
dialogue with global regulatory
agencies, to ensure that customers
stay informed about the latest
requirements, aligning operations
with industry standards.
These two case studies spotlight
specific instances where Particle
Measuring Systems advisory services
have played a pivotal role in resolving
contamination control issues and
illustrate the practical application
and impact of the advisory service
expertise in supporting customers
across different scenarios.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Case Study continued
Customer:
Manufacturer of next-generation vaccines
Customer:
PSM Pharma
Providing high-level expertise to
meet compliance requirements
Solving challenges and advising
on best practices
33
Challenge
The COVID-19 crisis has launched a
manufacturer of next generation vaccines
into the spotlight, transforming it from a
company that was pioneering research into
mRNA technology into a large-scale drug
manufacturer that is mostly managed
through Contract Manufacturing
Organizations (CMOs). The company was
inundated by the enormous amount of data
generated by CMOs and requested by
regulatory authorities, and they needed
expert and specific knowledge about
handling data and a large number of people.
PMS offer
Particle Measuring Systems (PMS) has been
offering consultancy support on a global
scale since 2019, and its team is comprised of
pharmaceutical manufacturing process
experts with direct experience in the field.
The services offered by PMS contribute to
their positioning as a leader in contamination
monitoring, ranging from sterility assurance
and quality and control assurance to
improving production processes. In short, the
PMS Advisory Team provides high-level
expertise to help its customers meet
compliance requirements.
Creating a customer-win situation
The collaborative relationship between the
vaccine manufacturer and PMS was born
thanks to the team’s reputation, high
professional level, and proven experience. Key
personnel contacted the team directly to
request urgent Quality and Control support to
assess that critical phase. What started as an
arrangement to support vaccine
manufacturer for a few months subsequently
became a collaboration started in 2022 that
the customer renewed again this year.
How does this apply to other customers?
The successful experience with a global
vaccine manufacturer in the spotlight
demonstrates how a high level of
competence and knowledge increases PMS’s
reputation by building a solid bond of trust
over time. More and more clients have
requested consultancy services thanks to
recently hired key people who introduced
PMS because they have collaborated with us
successfully in previous work experience and
trust us.
Challenge
PSM Pharma, a PMS customer, requested
help on how to best install a particle counter
in a cleanroom where they planned to
manufacture aseptically filled injectables,
which need the highest purity of air quality in
the pharma industry for manufacturing. One
of our international Advisors from the USA
helped with this relatively easy task on short
notice. During this consultancy, it became
clear that the end customer had several
further projects on which our Advisory group
could assist.
About the customer
PSM Pharma is a contract manufacturer
(CDMO) for pharmaceutical manufacturers
around the world that offers aseptic fill &
finish as well as final packaging services for
clinical and commercial phases. The company
is a powerful partner that offers its customers
comprehensive end-to-end customer
support, maximum flexibility for different
batch sizes, and top performance in the small
to medium batch size range.
Benefits to the customer
The customer has access to the complete
range of environmental monitoring
knowledge of PMS. The advisory group was
able to help with knowledge on particle
transportation, risk assessments in rooms and
machines, and microbial collection in water, in
air, and on surfaces. Even the data collection
and the use of the data for trending later are
being worked on by PMS personnel. The
environmental monitoring specialists of PMS
have helped to solve challenges, advised on
best practices, and gave feedback on the
process and the facility design. With up-to-
date knowledge of current regulations, PMS
has helped PSM to build a state-of-the-art,
world-leading, fill-finish facility.
“We have been using the services of the PMS advisory
group over the past years and are working on several
projects together at the moment. They have shown
great expertise with environmental monitoring
knowledge and are very helpful to us as an external
consultant. The fact that the PMS advisory team knows
about current regulations worldwide helps us build the
best facility for all the needs of our customers.”
Bianca Bohrer
CEO, PSM Pharma
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 34
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Our Businesses
Empowering
the innovators
“We have made excellent
progress in 2023, expanding
margins and delivering
strong profit growth through
a number of initiatives.”
Ben Bryson
President, Spectris Dynamics
Spectris Dynamics
Leader in advanced, integrated virtual and physical test and
measurement.
A very strong financial performance
underpinned by significant margin
expansion
Spectris Dynamics delivered a very strong
financial performance in 2023, delivering
double digit-growth in sales and operating
profit, underpinned by particularly strong
margin expansion. These results reflect the
successful re-organisation of the Division at
the start of the year into three customer-
aligned sectors of virtual test, physical test
and in-process, alongside a number of
specific actions to improve gross margins
and overheads.
Sales increased by 10% to £542.8 million
(2022: £492.2 million). After taking into
account £21 million (4%) sales growth from
the acquisition of Dytran and MicroStrain
and £1.9 million (0%) for foreign exchange
movements, LFL sales grew by 6%. Sales grew
across all key end markets, with particularly
strong growth in aerospace & defence and
academia and on a regional basis, our largest
market, Europe.
Orders were 3% lower (6% lower on LFL basis)
than the comparative period with strong
double-digit order growth in aerospace &
defence (A&D) and academia more than
offset by the expected softening in order
intake across machine manufacturing and
automotive. On a regional basis, good levels
of order growth in the US were more than
offset by Europe and Asia with these two
regions having the largest exposure to softer
end markets.
Adjusted operating profit of £93.1 million was
significantly ahead of the comparative period,
up 26%, (24% on a LFL basis), with a significant
increase in adjusted operating margin which
ended the year 220bps higher (240bps higher
on a LFL basis) at 17.2% (2022: 15.0%). This
increase reflects the anticipated strong
increase in gross margins resulting from our
focus on operational excellence alongside the
successful execution of a margin expansion
plan comprising pricing, re-organisation,
product design cost outs, supply chain
optimisation and rationalisation of our
product portfolio.
Statutory operating profit increased by 21% to
£56.2 million (2022: £46.5 million) reflecting
growth in the underlying business, which was
partially offset by £7.6 million of additional
costs related to the investment in our new
ERP system, as part of the business
transformation project. As a result, statutory
operating margin increased 100bps to 10.4%
(2022: 9.4%).
Well positioned in attractive markets
We are a world leader in the provision of
advanced integrated physical and virtual
testing and measurement. The Division is
focused on four premium product lines:
virtual test; software; data acquisition; and
high-precision sensors with high growth
prospects, where we have leading market
positions. These products are complementary
for customers and combine to offer the
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023
35
Our businesses continued
3
4
1
2
Sales by location (%)
1 Europe
2 North America
3 Asia
4 ROW
44
28
26
2
5
4
3
1
2
Sales by end market (%)
1
Technology-led industrials
2 Automotive
3 Academic research
4 Electronics and semiconductor
5 Other
40
27
8
6
19
selected high-value end markets, where
customers are focused on improving the
productivity of high-value assets. This has
driven demand for our weighing technologies,
including for smart OEM-type solutions in
medical and healthcare applications, where
accurate and reliable sensors are critical.
Aerospace and defence
We saw strong LFL orders and sales growth
in 2023 in Europe and North America
underpinned by the continued investment in
new and existing propulsion technologies, as
well as increased spending in commercial
space and defence.
In civil aerospace, we are seeing strong
demand for our expertise to support the
development of alternative propulsion
technologies including electrification and
hydrogen-based solutions. We secured a
large order from a major engine manufacturer
for our latest Fusion DAQ product and
sound & vibration software to support
the development of its next generation
gas turbine.
We saw strong growth in our leading
real-time computation software that provides
critical simulations in defence applications
enabling pinpoint accuracy and used in
systems such as threat detection. Also, during
the year we secured a major order from BAE
systems to supply hull vibration monitoring
equipment for the UK Royal Navy’s
shipbuilding programme. Our solution
includes transducers, data acquisition, and
vibration measurement and analysis software.
broadest test and measurement solutions in
the market. We are well positioned in
attractive growth markets that are benefiting
from a number of structural growth trends:
•
increased adoption of Virtual Test
particularly in automotive and defence to
accelerate the innovation cycle;
• digitisation and the increased use of digital
tools to design and test, lowering the cost
of new innovations and to process large
amounts of more complex data;
• electrification and the transformation of
mobility and energy; and
• automation to enhance productivity in a
more connected world.
These four key growth trends are aligned with
our Purpose to Empower the Innovators for a
cleaner, healthier, and more productive world
and are supporting higher levels of growth
within our market segments.
Automotive
LFL sales were ahead of a tough comparator,
with a strong performance in Europe partially
offset by North America and Asia.
We saw very good sales growth for our
electric powertrain testing solutions in
Physical Test leveraging our high-speed data
acquisition systems, sensors and software.
And in In-process, demand for our end-of-line
testing solution for electric drive systems
continued on a positive trend during the year.
In Virtual Test, while sales were lower
compared with 2022, we made good
progress selling our hardware-in-the-loop
solutions and secured a number of new
orders for our multi-attribute simulators
including our COMPACT FSS which was
launched during the year. Our Virtual Test
offering also gained recognition through a
Supplier of the Year award from Pirelli and an
innovation award for our DiM 300 simulator
as the 2023 Development Tool of the Year by
Vehicle Dynamics International.
As reported at the half year, we have seen a
softening in demand with LFL orders lower
than the prior year, as customers adjusted
their order patterns, reflecting a combination
of easing supply chains as lead times have
shortened and a reduction in the speed of
rollout of new EV programmes among
leading automotive manufacturers.
Over the medium-term, we continue to
expect growing demand for automotive R&D,
driven by the development and adoption of
electric and software-defined vehicles and
the need to reduce development time. With
our broad product offering across Virtual Test,
Physical Test and In-Process we are extremely
well placed to benefit from this growth.
Machine manufacturing
Sales to customers wanting to monitor their
production processes and deployed assets
were slightly ahead of 2022 on a LFL basis,
with growth in North America and Europe
largely offset by Asia.
In our OEM sensor business, where
customers incorporate our custom sensor
solutions into their end products, we
delivered 55 customer prototypes, setting a
new record in the process. These projects
which provide strong foundations for future
sales growth were broad-based covering a
range of sensing capabilities and end uses
including: force sensors for batteries and
brakes applications; strain sensors for fuel
cells and electric vehicles; torque sensors for
robotics; and mechatronics.
We were also successful selling our
high-precision accelerometers into the
semiconductor industry to control machine
vibration. During the year, we strengthened our
In-process offering combining structural health
monitoring, optical sensing and software to
create a turnkey solution for customers.
Against a strong comparator, order intake in
machine manufacturing for the full year was
lower on a LFL basis, particularly in Asia,
which more than offset demand growth in
North America.
We believe that over the medium to longer-
term, the move towards greater levels of
automation driven by the scarcity of labour
and the need for greater efficiency, will
continue to drive demand from machine
manufacturing customers and in turn, our
smart and OEM sensor offering. Sales to this
sector continue to be helped by our focus on
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
36
Our businesses continued
And in civil space, a market which is growing
quickly, with significant future potential, we
are seeing continued growth in demand for
our piezo-electric vibration sensing systems,
which have been used in a number of
customer applications.
leverage growth and customer intimacy
from our domain expertise. These three
sectors align with our customers’ test and
measurement requirements, as their
products are conceived, developed, then
manufactured and maintained.
We were proud to provide Dynetics with
a solution to evaluate the capabilities of its
United Launch Alliance Vulcan Centaur
booster to ensure it can cope with extreme
forces during space flight. Our solution,
based on proven and precise structural
testing tools, comprised a data acquisition
system to acquire data from more than
3,000 strain gauges and over 300 full-bridge
pressure transducers, along with additional
sensors. As a result of deploying the solution,
Dynetics improved the efficiency and
accuracy of testing enabling it to provide
better services to its customers and
commercial space projects.
We remain well placed to support long-term
innovation projects. OEMs continue to invest
in sustainable fuels, efficiency gaining
technologies, especially weight saving and
power improvements. We also see demand
increasing for energy transition related
projects, including electric aircraft and those
running on alternative lower-carbon fuels.
Our sound and vibration and EPT solutions
are well placed to capture this.
Academia
LFL sales into universities and research
institutes grew strongly with orders also up on
the prior year, underpinned by the same core
trends that underpin the Division, notably
growth in virtual testing, digitalisation and
electrification, with initiatives to reduce carbon
emissions and deliver Net Nero ambitions.
Consumer electronics and telecoms
LFL sales and demand in consumer
electronics and telecoms, which represented
6% of Dynamics sales were lower than the
comparative period, reflecting reduced levels
of customer investment in end-of-line-testing.
Investing for growth: R&D is driving
growth and market share gains
The organisation of the division around Virtual
Test, Physical Test and In-Process allows us to
By focusing on our customers’ needs, through
their product lifecycle, we are able to accelerate
innovation, save costs and reduce time to
market for their products, with key R&D focus
areas including: enhanced virtual test solutions;
simulation and analytic software; electric power
testing; data acquisition ecosystem; and smart
and OEM sensors.
During 2023, we launched a number of new
products. In Virtual Test, the launch of our
COMPACT FSS broadened and strengthened
our simulator portfolio. Powered by a
VI-grade AutoHawk real-time computer, the
FSS provides highly accurate and immersive
motion, vibration, and sound simulation in a
small footprint. It also enables human-in-the-
loop simulation, which is the vital connection
between objective physical characteristics
with subjective human perception.
As well as delivering 55 OEM customer
prototypes, we introduced newly developed
smart force sensors that link to a standard
industrial interface enabling simplified
machine design and point of measure
decision-making, ensuring improved
efficiency and simplified machine operation.
We continue to develop our new Fusion and
Advantage data acquisition offering with
additional products expected to be launched
in 2024. And in our software business, which
represents around 15% of Spectris Dynamics
sales, we released a number of major updates
to our market-leading nCode durability and
Reliasoft reliability products and updated our
perception software for EPT.
Investing for growth: compounding
growth through M&A
The acquisition of MicroStrain for £29.1 million,
which completed in September, represents
an excellent addition to Spectris Dynamics,
bringing complementary technology and
strengthening our sensor offering, particularly
in the fast-growing autonomous mobility,
industrial and robotics markets. It also
enables further penetration into the rapidly
growing automation and smart manufacturing
markets, while increasing our presence in
North America.
September 2023 marked the first anniversary
of the acquisition of Dytran, a leading
designer and manufacturer of piezo-electric
and MEMS-based accelerometers and
sensors for measuring dynamic force,
pressure, and vibration. Integration has gone
extremely well, including a significant
increase in productivity under our ownership.
The business has also made a meaningful
and positive contribution to the Division
including securing a number of customers
orders in commercial space.
Operational excellence to drive margin
expansion
We are driving operational excellence to
improve productivity and increase operating
margin towards the Group target level. The
ongoing roll out of SBS alongside our actions
on pricing, product redesign to lower cost
solutions and portfolio rationalisation have all
made a contribution to the substantial
220bps improvement in adjusted operating
margin in the year.
In 2023, we embedded our ‘Bronze, Silver,
Gold’ certification programme to drive lean
operations across our core operations with
three of our sites, Porto, Suzhou and
Marlborough achieving Bronze certification
by the end of the year.
At our Suzhou facility, through numerous
kaizen events and increased automation we
delivered 30% reduction in lead time as well
as labour and inventory cost savings of over
40% for a key product family with a total cost
reduction from improvement projects of
£0.8 million. Through optimisation of sea /air
and courier strategies we also delivered a
significant reduction in freight costs in excess
of £2.1 million and our Net Zero improvement
projects across our facilities, resulted in
£0.3 million in energy savings.
Alongside this we have made good
progress preparing for the further operational
transformation through a new CRM and ERP
solution which is being introduced in 2024
across the whole Division, creating a simpler,
common and more scalable set of processes.
Benefits from the new solution will start to be
realised from 2025 and it also represents a key
building block in driving further margin
expansion in the Division.
Summary
Spectris Dynamics is an established leader
in high performance virtual and physical
test, design software, data acquisition and
sensing. We are well positioned in strong
end-markets supported by sustainable trends
for a digitising and de-carbonising world.
We are executing and expanding on strong
fundamentals – integrated virtual and
physical test solutions, more software-
oriented R&D, operational excellence, and
strategic value-creating M&A. Having
delivered a strong performance in 2023, we
remain focused on margin expansion
through strategic growth initiatives, business
process improvement and benefiting from
our lean culture.
Spectris Dynamics
Statutory sales (£m)
Adjusted operating profit1 (£m)
Adjusted operating margin1 (%)
Statutory operating profit (£m)
Statutory operating margin (%)
2023
542.8
93.1
17.2%
56.2
10.4%
2022
492.2
73.6
15.0%
46.5
9.4%
Change
LFL change
10%
26%
6%
24%
220bps
240bps
21%
100bps
1. This is an alternative performance measure (APM). APMs are defined in full and reconciled to the reported
statutory measures in the Appendix to the Consolidated Financial Statements.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023
Case Study
37
Customer:
NIO / AMCT / nCode DesignLife
Developing improved
durability simulations
NIO, a global automobile manufacturer
headquartered in Shanghai, is a pioneer and
a leading company in the premium smart
electric vehicle market. NIO differentiates
itself through its continuous technological
breakthroughs and innovations, such as its
industry-leading, battery swapping
technologies.
HBK’s Advanced Material Characterisation
and Testing facility (AMCT), near Sheffield, UK,
has helped accelerate NIO’s capabilities for
fatigue simulation through a unique
combination of custom testing solutions to
provide high quality material fatigue data and
the power of nCode software.
“There is nothing like HBK’s AMCT
lab that provides the entire package
both in terms of the available
testing expertise but also the ability
to deliver a materials database that
could be used directly and easily in
nCode software.”
Artur Tarasek
Durability CAE Expert, NIO
Example NIO body structure
Challenge
Performing accurate virtual failure prediction
in innovative BIW (Body-in-White) structures
requires new material fatigue properties.
Comparison of design proposals and
engagement of key suppliers earlier in the
process to accelerate development and
minimise waste.
Solution
NIO selected HBK’s AMCT facility to carry out
material characterisation testing due to its
testing expertise and the ability to deliver a
materials database that could be used
directly and easily in nCode software.
Result
A standardised materials database for fatigue
and common processes enabling higher
quality results from which engineering design
decisions can be made. This enables NIO to
develop efficient and robust structures for
durability performance, reducing weight and
energy consumption to maximise range.
Image: NIO ET5T demonstrates innovative body engineering (image copyright NIO)
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 38
Case Study
HBK: empowering
rapid audio
advancements
Sound and vibration are critical to our quality of life.
They affect us every day, from the smartphones we use
and the cars we drive to the aircraft we fly in and the
environment in which we all live. At Spectris Dynamics,
we produce the world’s most accurate and advanced
technology for measuring and managing the quality of
sound and vibration.
These two examples show the breadth of our expertise and
applications. We’re empowering rapid advancements in
ways as diverse as improving the lives of people with
hearing loss to equipping modern naval combat ships to
manage their acoustic signature.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Case Study continued
Customer:
Leading global healthcare company
Customer:
BAE Systems
Revolutionising hearing aid
development
Ensuring the acoustic stealth of
modern naval combat ships
39
Challenge
Recent reports indicate that approximately
1.5 billion people worldwide experience some
form of hearing impairment. This widespread
issue is fuelled by factors such as an aging
population and a significant surge in hearing
loss among younger individuals, often
attributed to excessive exposure to loud noise.
Consequently, the market for audiology
devices is witnessing significant growth.
At a leading global healthcare company ,
hearing aid developers and test engineers
face a formidable challenge of staying at the
forefront of technological advancements,
while meeting user expectations for natural,
comfortable sound quality and seamless
communication. Additionally, they must
address the increasing demand for
personalised solutions and designs tailored
to individual inner and outer ear conditions.
Benefits to the customer
Having robust systems in place that
enable this company’s engineers to test,
benchmark, ensure quality, and enhance
product design is paramount. These systems
must prioritise high-quality hearing
reproduction while accommodating both
traditional, standardised electroacoustic
measurements and flexible, open processes
that support the development of innovative
hearing aid technologies and features.
To meet these requirements, the healthcare
company employs a HBK Head and Torso
Simulator (HATS) for both R&D and the
complex task of testing hearing aid features.
Optimised for the evaluation of audio devices
placed in, on or near the ear, it provides an
accurate representation of the experience
realised in an average human ear. With a pair
of hearing aids mounted on a HATS, the
acoustic properties of the hearing aids can be
measured from various directions, and in a
range of background noise environments..
The healthcare company has recently
acquired the latest high-frequency
incarnation of HATS, extending the evaluation
potential to encompass the full audio range
and anthropomorphic ear canal to allow
refinement of product geometry. High-
frequency HATS represents the culmination
of more than ten years of research into
human ear geometry and acoustic response
and is the first major advance of HATS
technology in 30 years. It’s recognised in the
market as the state-of-the-art for evaluating
human hearing perception.
The development of intelligent hearing aids
that seamlessly adapt to the user’s sound
environment is an immensely complex
undertaking. Nevertheless, leveraging HBK
solutions, the hearing healthcare engineers,
working at the edge of what is technically
possible, remain committed to their ongoing
pursuit of enhancing speech comprehension
for people with hearing loss and providing a
life-changing solution for those in need.
Challenge
To maintain a naval vessel’s acoustic
discretion, design engineers need to identify
and assess all noise sources. Permanently
installed systems monitor noise levels during
operation and advise the crew when the
acoustic signature of the vessel has exceeded
limits in many operational modes.
From modal testing and analysis of models
and prototypes to permanently installed
noise monitoring systems, HBK offers
best-in-class acoustic and structural testing
and monitoring solutions throughout a
vessel’s lifecycle , including underwater
acoustic measurements.
Benefits to the customer
We are providing Hull Vibration Monitoring
Equipment (HVME) to BAE Systems for the
UK Type 26 Global Combat Ship programme,
currently being built for the Royal Navy. All
eight Type 26 frigates will be equipped with
the latest self-noise monitoring software to
ensure that they can accurately manage their
own acoustic signature.
One of the tasks of the Type 26 is to protect
against potential intruding submarines; it is
vital they can monitor and keep their own
acoustic signature – the noise and vibration
a vessel and its on-board equipment and
systems project into the water – as low
as possible.
The HVME comprises commercial off-the-
shelf equipment that includes transducers,
data acquisition, vibration measurement
and analysis capabilities. The kit is tailored
to each vessel’s layout, enabling location-
specific alarms to be triggered in the event
of excessive noise or vibration, so the crew
can take action to reduce it.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 4040
Financial review
A year of strong
margin progression
and record
profitability
Sales increased by 9% or £121.8 million to £1,449.2 million (2022: £1,327.4 million)
on a continuing basis. Gross profit increased by £87.3 million driven by a
combination of pricing, increased volumes, a more benign input cost
environment and cost efficiencies derived from SBS.
Selling, General & Administration (SG&A)
expenses increased by £71.3 million, resulting
from higher staff costs including salaries, an
increase in travel costs reflecting a return to
more normal levels of customer interaction,
and foreign exchange impacts from
translation and revaluation.
Included within SG&A are configuration
and customisation costs carried out by third
parties on material software-as-a-service
(SaaS) project costs of £40.0 million (2022:
£21.7 million), to support the implementation
of a new SAP cloud-based ERP system. This
is a significant multi-year programme that
will continue in 2024. Investment in R&D
increased by £4.3 million to £108.1 million
representing 7.5% of sales (2022: £103.8 million
or 7.8% of sales).
Our adjusted operating margin of 18.1% was
130bps higher than the comparative period
(2022: 16.8%) resulting in a record level of
adjusted operating profit of £262.5 million
(2022: £222.4 million) an increase of 18%
(18% on a LFL basis). As a result of this
excellent performance, which is testament to
the hard work of our colleagues, we are well
on our way to meeting our medium-term
target to deliver margins in excess of 20%.
Statutory operating profit to profit
before tax
Statutory profit before tax for the period
of £185.6 million (2022: £151.5 million) is
calculated after net finance income of
£6.9 million (2022: £17.3 million cost) and
£12.6 million loss on disposal of businesses,
predominantly related to the divestment
of Concept Life Sciences (CLS) (2022:
£0.3 million profit).
The £24.2 million improvement in net finance
income was mainly due to retranslation of
short-term intercompany loan balances that
moved from a £14.6 million loss in 2022 to a
£5.7 million gain in 2023. This reflects the
strengthening of Sterling against both the
Euro and US Dollar over the last 12 months,
compared with 2022 where Sterling
weakened markedly against both currencies.
Bank interest receivable was £3.8 million
higher, due to a higher average cash balance
and the significant increase in Sterling
interest rates during the year. There have
been no drawings against our loan facilities
during the year, with interest payable solely
relating to the commitment fee on the
Revolving Credit Facility (RCF) and the
amortisation of capitalised loan fees relating
to this facility.
On 31 March 2023, the Group disposed of
the remaining part of CLS, which formed
part of the Spectris Scientific Division. The
“We are on track
to deliver our 20%
margin target.”
Derek Harding
Chief Financial Officer
Headcount increased by 1.4% versus the
comparative period, with increases to support
growth offset by efficiencies from SBS
and structural changes, mainly within
Spectris Dynamics.
Statutory operating profit was £188.6 million,
an increase of £16.0 million (2022: £172.6 million).
Statutory operating margin of 13.0% was in
line with 2022 (13.0%).
Net transaction-related costs and fair
value adjustments were £14.0 million
(2022: £8.3 million) primarily relating to the
acquisitions completed during both the
current and prior years.
In 2023, the Group made an additional
contribution of £1.0 million to the Spectris
Foundation (2022: £nil). Consistent with the
prior year, material SaaS project costs of
£40.0 million (2022: £21.7 million) are excluded
from adjusted operating profit, as are
amortisation of acquisition-related intangible
assets £18.9 million (2022: £19.6 million).
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023
Financial review continued
Financial highlights
Sales (£m)
A 2022
B Disposals
C 2022 organic
D Currency
E LFL
F Acquisitions
G 2023
YoY
Change
(6%)
14%
14%
1,500
1,400
1,300
1,200
1,100
1,000
900
800
.
4
2
3
1
1
.
3
2
.
2
9
4
4
,
1
.
4
7
2
3
,
1
.
)
7
7
1
(
.
7
9
0
3
,
1
.
)
0
6
1
(
GFEDCBA
320
Adjusted operating profit (£m)
A 2022
B Disposals
C 2022 organic
D Currency
E Gross profit
F Overheads
G Acquisitions
H 2023
4
2
2
2
)
7
0
(
240
200
280
160
120
.
.
.
2
8
8
6
2
.
)
1
.
8
4
(
.
5
2
6
2
7
.
1
2
2
)
9
.
1
(
HGFEDCBA
Continuing operations
Statutory operating profit
Net transaction-related costs and fair value
adjustments
Spectris Foundation Contribution
Depreciation of acquisition-related fair value
adjustments to property, plant and equipment
Configuration and customisation costs carried out
by third parties on material SaaS projects
Amortisation of acquisition-related intangible
assets
Adjusted operating profit
Continuing operations
Statutory operating profit
Fair value through profit and loss movements on
debt instruments
Share of post-tax results of associates
(Loss)/profit on disposal of businesses
Finance income
Finance costs
Statutory profit before tax
2023
£m
188.6
14.0
1.0
–
2022
£m
172.6
8.3
–
0.2
40.0
21.7
18.9
19.6
262.5
222.4
2023
£m
188.6
2.8
(0.1)
(12.6)
11.0
(4.1)
185.6
2022
£m
172.6
(4.1)
–
0.3
1.9
(19.2)
151.5
41
Sales
£1,449.2m
(2022: £1,327.4m)
Change yoy 9%
LFL change yoy 10%
Adjusted operating profit
£262.5m
(2022: £222.4m)
Change yoy 18%
LFL change yoy 18%
ROGCE
18.5%
(2022: 16.0%)
Change yoy 250bps
consideration received of £15.5 million
was settled in cash, resulting in a loss on
disposal of £10.3 million. Further details
are provided in Note 24. Also included in the
£12.6 million loss on disposal of businesses is
£2.3 million of transaction costs relating to
prior year disposals.
Tax
The effective tax rate on adjusted profit
before tax for 2023 was 21.5% (2022: 21.7%).
The effective tax rate on statutory profit
before tax was 21.7% (2022: 24.2%).
Earnings per share
Adjusted earnings per share grew by 25% to
199.7 pence (2022: 159.9 pence). Statutory
earnings per share of 140.3 pence were 31%
ahead of the prior year (2022: 106.7 pence).
LFL movements
After very strong order intake growth of 9%
on a LFL basis in 2022, the easing of global
supply chains has led to the return of more
normal customer ordering patterns in 2023
with order intake 5% lower on a LFL basis for
the full year. On a LFL basis, orders in North
America and Europe were down 0.5% and 3%
respectively, with Asia 10% lower largely driven
by China where demand has been slower
to recover.
LFL sales increased by £132.4 million (10%),
reflecting the excellent conversion of our
record order book at the start of the year
and the easing of global supply chains.
Acquisitions, net of disposals, increased sales
by £5.4 million (0%) and foreign exchange
movements decreased sales by £16.0 million
(1%). The relative contribution of the drivers of
sales growth reversed in 2023 as expected,
with LFL sales growth of 10% comprising 8%
price and 2% volume.
Strong sales growth, alongside positive
net pricing and a more benign input cost
environment as supply chains improved
resulted in a 120bps increase in adjusted
gross margins. Within this, Spectris Dynamics
delivered a particularly impressive performance,
delivering on the target they set at the start of
the year. LFL adjusted gross margins increased
by 90bps to 57.6%.
Cash flow
Adjusted cash flow from continuing
operations increased by £107.3 million to
£271.1 million compared to 2022, resulting in
an adjusted cash conversion rate from
continuing operations of 103% (2022: 74%).
The Group generated a substantial increase
in adjusted cash flow from continuing
operations driven by the increase in adjusted
operating profit, a significantly lower net
outflow in working capital and lower levels
of capital expenditure.
Capital expenditure of £24.7 million
(2022: £44.1 million) equated to 1.7% of sales,
compared to 3.3% in 2022. The lower level of
expenditure in 2023 reflects the phasing of
spend relating to the new PMS facility in
Colorado that is planned to complete in
2024. Capital expenditure was 64% of
adjusted depreciation and software
amortisation (2022: 111%).
During the year ended 31 December 2023,
3,382,896 ordinary shares were repurchased
and cancelled by the Group, representing
the final tranches of the £300 million share
buyback programme announced on 19 April
2022 and part of the first tranche of the
£150 million share buyback announced on
11 December 2023. This resulted in a cash
outflow of £114.9 million, including transaction
fees of £1.2 million.
During the year ended 31 December 2022,
6,439,493 ordinary shares were repurchased
and cancelled by the Group as part of the
£300 million share buyback programme
announced on 19 April 2022, resulting in a
cash outflow of £191.0 million, including
transaction fees of £1.2 million.
Financing and treasury
The Group finances its operations from
retained earnings and, where appropriate, from
third-party borrowings. Total borrowings as at
31 December 2023 were £nil (2022: £0.1 million).
At 31 December 2023, the Group had a
cash and cash equivalents balance of
£138.8 million of which £0.3 million related
to assets held for sale. The Group also had
various uncommitted facilities and bank
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
4242
Financial review continued
overdraft facilities available but undrawn.
Gross debt was £nil, resulting in a net
cash position of £138.8 million, compared
to a net cash position of £228.0 million at
31 December 2022, representing an
£89.2 million year-on-year decrease in
net cash.
As at 31 December 2023, the Group had
£393.1 million of committed facilities,
consisting entirely of a $500 million multi-
currency RCF maturing in July 2025. The
RCF was undrawn at 31 December 2023
(2022: undrawn).
For the 12 months ended 31 December 2023,
there was net finance income for covenant
purposes of £3.9 million, resulting in the
interest cover ratio being n/a (31 December
2022: n/a). The minimum covenant interest
cover requirement is 3.75 times (covenant
defined earnings before interest, tax and
amortisation divided by net finance charges).
Leverage (covenant defined earnings before
interest, tax, depreciation, and amortisation
divided by net cash) was less than zero
(31 December 2022: less than zero) due to
the Group’s net cash position, against a
maximum permitted leverage of 3.5 times.
The Group has prepared and reviewed cash
flow forecasts for the period to 31 December
2028, which reflect forecasted changes in
revenue across its business and performed
a reverse stress test of the forecasts to
determine the extent of downturn which
would result in insufficient liquidity or a
breach of banking covenants. Revenue would
have to reduce by 38% over the period under
review for the Group to run out of liquidity
headroom. The reverse stress test does not
take into account further mitigating actions
which the Group would implement in the
event of a severe and extended revenue
decline, such as cancelling the dividend or
reducing capital expenditure. This assessment
indicates that the Group can operate within
the level of its current facilities, as set out
above, without the need to obtain any new
facilities for a period of not less than
12 months from the date of this report.
Following this assessment, the Board of
Directors are satisfied that the Group has
sufficient resources to continue in operation
for a period of not less than 12 months from
the date of this report. Accordingly, it
continues to adopt the going concern basis
in relation to this conclusion and preparing
the Consolidated Financial Statements.
Currency
The Group has both translational and
transactional currency exposures.
Translational exposures arise on the
consolidation of overseas company results
into Sterling. Transactional exposures arise
where the currency of sale or purchase
invoices differs from the functional currency
in which each company prepares its local
accounts. The transactional exposures
include situations where foreign currency
denominated trade receivables, trade
payables and cash balances are held.
After matching the currency of revenue with
the currency of costs, wherever practical,
forward exchange contracts are used to
hedge a proportion of the remaining forecast
net transaction cash flows where there is
reasonable certainty of an exposure. At
31 December 2023, approximately 65% of
the estimated transactional exposures of
£269.4 million for the next 18 months were
hedged using forward exchange contracts,
mainly against the Euro, US Dollar, Chinese
Yuan Renminbi and Japanese Yen.
The largest translational exposures during the
year were to the US Dollar, Euro and Chinese
Yuan Renminbi. Translational exposures are
not hedged. The table below shows the
average and closing key exchange rates
compared to Sterling.
During the year, currency translation effects
resulted in adjusted operating profit being
£1.9 million lower (2022: £12.5 million higher)
than it would have been if calculated using
prior year exchange rates.
Adjusted cash flow from continuing operations
Adjusted operating profit
Adjusted depreciation and software amortisation1
Working capital and other non-cash movements
Capital expenditure
Adjusted cash flow from continuing operations
Adjusted cash flow conversion from continuing operations
2023
£m
262.5
38.8
(5.5)
(24.7)
271.1
103%
2022
£m
222.4
39.6
(54.1)
(44.1)
163.8
74%
1. Adjusted depreciation and software amortisation represent depreciation of property, plant and equipment,
software and internal development amortisation, adjusted for depreciation of acquisition-related fair value
adjustments to property, plant and equipment.
Other cash flows and foreign exchange
Tax paid
Net interest received on cash and borrowings
Dividends paid
Share buyback
Acquisition of businesses, net of cash acquired
Acquisition of investment in associates
Transaction-related costs paid
Proceeds from disposal of businesses, net of tax paid of £5.9 million
(2022: £27.9 million)
SaaS-related cash expenditure
Lease payments and associated interest
Restructuring costs paid
Net proceeds from exercise of share options
Total other cash flows
Adjusted cash flow from continuing operations
Adjusted cash flow from discontinued operations
Foreign exchange
(Decrease)/increase in net cash
2023
£m
(50.3)
4.4
(79.7)
(114.9)
(49.5)
(7.8)
(5.8)
3.3
(40.0)
(15.6)
(1.4)
0.6
(356.7)
271.1
–
(3.6)
(89.2)
2022
£m
(46.8)
0.5
(78.6)
(191.0)
(114.7)
(2.9)
(6.5)
365.4
(21.7)
(16.4)
(7.6)
0.2
(120.1)
163.8
7.3
9.2
60.2
US Dollar (USD)
Euro (EUR)
Chinese Yuan Renminbi (CNY)
2023
(average)
1.24
1.15
8.81
2022
(average)
1.24
1.17
8.30
Change
0%
(2%)
6%
2023
(closing)
1.27
1.15
9.03
2022
(closing)
1.21
1.13
8.31
Change
5%
2%
9%
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Financial review continued
Transactional foreign exchange losses of
£5.8 million (2022: £nil) were included in
administrative expenses, whilst sales include
a gain of £4.5 million (2022: £4.3 million loss)
arising on forward exchange contracts taken
out to hedge transactional exposures in
respect of sales.
Other non-reportable operating segment
The financial and operating performance of
the Spectris Scientific and Spectris Dynamics
reportable segments are provided in
accordance with IFRS 8. The Red Lion
Controls and Servomex businesses are
reported within the Other non-reportable
operating segment.
On a statutory basis, sales for the Other
non-reportable operating segment of
£202.2 million increased by 14% compared
to 2022 (2022: £177.4 million) with LFL sales
also up 14%. Adjusted operating profit for
the segment was £38.4 million (2022:
£27.2 million), an increase of 41% (40% LFL),
with an adjusted operating margin of 19.0%,
an increase of 370bps on 2022 (350bps LFL).
Statutory operating profit rose 27% to
£33.2 million (2022: £26.2 million), primarily
due to improved gross margins from pricing
and volume drop through, with the statutory
operating margin improving 160bps to 16.4%.
Red Lion Controls had a very strong year,
continuing the trends we saw in the first half,
with both sales and profitability benefiting
from a combination of volume growth and
revised pricing. Volume growth was driven by
easing supply chains and increased capacity
due to operational improvements leveraging
the SBS, with the latter also contributing to
strong margin improvement.
43
Capital allocation priorities
Ensuring the appropriate allocation of capital remains a key area of focus for the
Board and within that, striking the right balance between generating strong returns
for shareholders and investing for growth.
1. Organic growth
• Maintenance capex
– In line with depreciation
• R&D > 8% of sales improving vitality
• Growth capex projects
3. M&A growth
• Deployment of capital to drive growth
• Technology
• End markets
• Customers
2. Progressive dividend
• Sustainable progressive dividend policy
• Strong track record of dividend growth
4. Additional shareholder returns
• Return excess capital, not used for profitable
growth, via appropriate mechanisms
A balanced approach to capital allocation
Sources and uses of cash 2019 – 2023 (£m)
On 11 December 2023, the Group announced
that agreement had been reached for the
sale of the Red Lion Controls business. As a
result, the Red Lion Controls business has
been classified as a disposal group held for
sale and presented separately in the
Consolidated Statement of Financial Position.
The required regulatory approvals were
received in January and February 2024 and
the completion of the sale is expected to take
place during the second quarter of 2024.
In 2023, Red Lion had sales of £101.8 million
and adjusted operating profit of £21.9 million.
Servomex also delivered a very good
performance with sales growth driven by
higher demand and a strong operational
performance. Higher contribution margins
due to price increases and easing material
cost inflation drove a strong increase in
profitability.
Derek Harding
Chief Financial Officer
Cashflow
from
operations
1,853
Disposals
982
Sources
Capex/SaaS
R&D
Dividends
M&A
Buyback
Other*
Debt reduction
296
492
385
361
507
340
436
Uses
18
Working
capital
Cash
balance
139
*
* Other comprises: tax payments, lease payments, interest, other
Dividend per share (pence)
80
75.4
79.2
[XX]
71.8
68.4
65.1
61.0
56.5
52.0
49.5
46.5
42.8
39.0
33.6
28.0
23.4 24.3
21.0
11.7 12.3 12.8 13.4 14.5 15.8 17.5
70
60
50
40
30
20
10
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 4444
Operational excellence
Embedding a lean mindset
across the Group
Deploying the SBS to improve and
simplify our business processes,
and creating a healthy, high-
performance culture, are key
elements of our Strategy for
Sustainable Growth. These provide
a series of building blocks on our
journey towards delivering
operating margins of 20%+.
SBS
The main objectives of the SBS are to remove
waste, drive efficiency and strengthen
competitiveness as we grow the business,
with each of our global sites driving a number
of continuous improvement activities. These
activities not only deliver hard financial
benefits, but they also strengthen our
capabilities and create additional capacity
to invest in innovation and areas like
automation.
• During the year, the SBS continued to
make a meaningful contribution to the
profitability of the Group, with benefits
realised in 2023 from operational excellence
initiatives amounting to over £10 million.
• Benefits derived from a combination of
gross profit improvement, through sales
volume drop-through, and overhead
reduction.
Benefits derived from the SBS in 2023:
> £10m
• In 2023, we embedded our ‘Bronze,
Silver, Gold’ certification programme to
drive lean operations across our core
operational metrics.
• At the end of the year, seven of our sites
had achieved Bronze certification.
• In 2024 we expect additional sites to
achieve Bronze status and others to
make progress towards Silver.
• We are also broadening the SBS to
encompass innovation as well as the
enabling functions including IT, Finance,
HR and Legal.
SBS delivers tangible and sustainable value and is embedded in our DNA
so that continuous improvement is owned by everyone
Grow Foundation
2020–2021
Expand Impact
2022–2023
Go for Gold
2023–2024
Embed
2024 >
• One language
• Eight core
methods
• Training
• Clear expectations
• Deliver value
• SBS investment
• Bronze, Silver
• Value stream
Gold
• Expand SBS
framework
• SBS capability
building
flow
• Lean culture
shift
• Sustainable
systems
Business transformation
We have made good progress on the
implementation of our business
transformation program, enabled by SAP
S/4HANA, focusing on four key areas:
people; process; technology; and data.
The programme will deliver simplified and
standardised processes, helping us deliver
our growth objectives and a number of
benefits including: simpler working
practices; better customer experience;
enhanced interaction with suppliers;
and a more globally connected and
scalable business.
Our approach has been to adopt the
standard SAP configuration wherever
possible, adjusting our business processes
to the system, thereby limiting
customisation and reducing complexity.
Implementation is scheduled to take place
in 2024 through a phased rollout, with
benefits generating an additional 150bps
in adjusted operating margin.
2023
2024
2025
Preparation, design and test
Phased implementation
across Spectris
Benefits realisation begins
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Case Study
45
Customer:
University of Pittsburgh
Delivering sustainable solutions
to current challenges in energy
storage and conversion
Energy systems drive every aspect of our
modern life, from cell phones to electric cars
and even space travel. But to achieve energy
that is clean, renewable and reliable, we need
better batteries and fuel cells. If scientists
could see inside energy storage and
conversion systems while they operate, they
could not only identify where changes are
needed, but also develop new materials to
enhance their performance. A unique
collaboration in the US between University
of Pittsburgh’s Kumta Lab and Malvern
Panalytical is enabling researchers to do
just that.
“If we can create a battery pack
system that can be charged or
recharged on a continuous basis
using wind and solar power – for
example, a car that charges while
you drive – we will eliminate the
current reliance on carbon and
fossil fuels almost entirely.”
Dr. Prashant N. Kumta
University of Pittsburgh
Dr. Prashant N. Kumta and his team aim to
deliver improvements in two key areas:
• Energy storage
The lithium-sulfur battery is viewed as an
attractive replacement for the rechargeable
lithium-ion batteries currently used in
applications such as electric vehicles, cell
phones and laptops. Kumta Lab is targeting
improvements to its safety, cost and
efficiency.
• Energy conversion
The lab’s primary focus is water electrolysis
and hydrogen fuel cells. These are clean,
renewable and low carbon energy sources
that could help to achieve Net Zero goals,
but they are currently very costly.
Using data and insights drawn from Malvern
Panalytical’s Empyrean X-ray diffraction
technology, Dr. Kumta and his team are
working towards achieving a series of
ambitious goals:
400%
growth in the watt
hours per kilogram a
rechargeable battery
delivers
300%
increase in the miles
an electric car can
travel between
charges
100%
reduction in the
volume of precious
metals used in water
electrolysis and
hydrogen fuel cells
50%
reduction in the price
tag of an electric
vehicle
Find out more online
Revolutionising Energy Storage and Conversion:
Collaboration with the University of Pittsburgh
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
46
Risk management
Our
approach
We recognise that effective management of risk is essential to the
successful delivery of our strategic objectives. As such, risk management
is built into our day-to-day activities and forms an integral part of how
we operate.
The Group has a well-established process,
which delivers visibility and accountability for
risk management across our businesses. This
process forms part of the Group’s overall
internal control framework, as described on
page 47.
Risk management process
Our approach to risk management combines
a granular bottom-up assessment of
day-to-day operational risk (managed by the
businesses) with a top-down assessment of
those risks that are most significant at the
Group level (managed by the Executive Risk
Committee and reviewed by the Audit and
Risk Committee).
Business unit risk management
Each business undertakes a detailed
assessment of risk across their markets,
processes and operations, including a
consolidation of any emerging risks that
should be formally evaluated. We operate
Audit and Risk Committees for each of our
businesses. These Committees, which meet
quarterly, represent a key component of the
second line of risk management (see page
100) in respect of Internal and External Audit
matters, internal control, risk management,
and other areas of compliance.
Our risk management approach includes the
consideration of emerging risks, whether they
be operation-specific or broader in scope,
such as climate change and environmental
matters or developments in artificial
intelligence. Further details on how climate-
related risks are managed are provided on
page 66.
During 2022, we saw an increase in gross risk
in a number of areas, including geopolitical
and market risk, cyber threat and business
disruption. We consider that across our
Principal Risks the level of gross risk remains
heightened, with a further increase in respect
of market/financial shock as a result of greater
uncertainty in external markets . All of these
risks are subject to Executive oversight and
formal assessment, and we continue to
review the effectiveness of existing controls
over those risks and to identify and execute
further actions where appropriate in order to
manage our net exposure.
In 2022 the net risk rating for geopolitical risk
was reassessed from moderate to high in
view of the increased potential for this risk to
have an adverse impact on the Group, whilst
in respect of compliance risk the continued
work to strengthen our controls framework
and to further embed the Spectris Code of
Business Ethics resulted in a reassessment of
the net rating from high to moderate. The
Board considers that, after taking into
account existing controls, no changes to the
net risk ratings are required in 2023, although
we continue to monitor developments and to
keep our assessment of both gross and net
risk under review.
A formal risk register is reviewed and finalised
in each respective business Audit and Risk
Committee and submitted to the Group, with
each risk assessed in terms of gross and net
impact and likelihood. Key mitigations, both
planned and existing, have formal owners
and are subject to regular operational review
as well as independent assurance where
appropriate.
Group risk management
Group oversight of risk management is
conducted through the Executive Risk
Committee whose purpose is to ensure
appropriate management of the Group
Principal Risks and to oversee the operation
of the Group’s Enterprise Risk Management
framework. The Executive Risk Committee is
supported by the Risk and Control function,
who enable the risk management process
and act as a centre of excellence as part of the
Group’s second line activities, consistent with
the four lines of risk management model
described on the following page.
The Executive Risk Committee, together with
the Audit and Risk Committee, performs a
continuous top-down assessment of risk
throughout the year, informed by the
approach established at each of the
businesses. The aim of this process is to
identify those Group Principal Risks that
represent the most significant threat to the
achievement of the Group’s performance
against its strategic objectives and/or those
risks that are more suitably assessed,
monitored and mitigated centrally. In
addition, the Board carries out a robust
assessment of the Group’s principal and
emerging risks on an annual basis.
An owner is assigned to each Group Principal
Risk, which is formally assessed in terms of its
gross and net severity, a risk appetite is
defined, and mitigations are identified within
the four lines of defence framework. Each risk
is subject to a formal assessment by the
Executive Risk Committee during the year
and the suite of Group Principal Risks is
reviewed twice yearly by the Audit and Risk
Committee.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Risk management continued
Four lines of risk management
The Group has in place a four lines
risk management model
First line
The first line is responsible for the
identification of all risks in the ‘risk
universe’ of each business unit. This risk
awareness informs the control
environment (the first line is primarily
responsible for the execution of key
controls), specific mitigations and is a key
consideration in driving business decisions.
Second line
The second line is responsible for the risk
management framework that the first
line operates within. This includes the
development of a standardised approach
to identifying and reporting risk, an
internal control framework aligned to
those risks, and a suite of policies to ensure
the consistent application of business
processes and controls. The second line is
also responsible for monitoring the
performance of first line activities and for
taking a holistic view of risk, to determine
which risks are of principal importance to
the Group.
Third line
The third line is responsible for providing
assurance over the effectiveness of the
Group’s risk management and internal
control framework. This is most commonly
undertaken by Internal Audit on behalf of
the Audit and Risk Committee and Board
of Directors.
Fourth line
The fourth line is the Audit and Risk
Committee, Board of Directors and
External Audit, providing independent,
external, and/or non-executive oversight
across the entire risk management
framework, holding accountable those
responsible for all activities within the
three lines of defence.
47
Board
–
Audit and
Risk Committee
–
External Audit
Executive Risk
Committee
–
Internal Audit/Other
Assurance
Business Audit and Risk Committees/
Group Corporate Functions
Employees and Managers in each business
Group Principal Risks
Fourth line
External/Non-executive
oversight
Third line
Independent assurance
Oversight and
independent
assurance
Second line
Risk management framework,
policies, processes and controls
Ownership
and control
First line
Risk identification and control
execution
Operational Risks
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 48
Principal risks and uncertainties
Managing our
principal risks
Strategic transformation
Cyber threat
Definition
Failure to successfully deliver the Group Strategy for
Sustainable Growth.
Definition
Failure to appropriately protect critical information and other
assets from cyber threats, including external hacking, cyber
fraud, demands for ransom payments and inadvertent/intentional
electronic leakage of critical data.
Link to strategy
• Great businesses
• Aligned to structural growth markets
• Customer centricity
• Investing in growth
• Operational excellence
Risk assessment
Moderate
Change in rating
Risk appetite
Balanced
Impact
Link to strategy
• Customer centricity
• Operational excellence
Risk assessment
High
Change in rating
Risk appetite
Cautious
Impact
Our day-to-day activities are inherently aligned to the
successful achievement of the Group’s strategic objectives.
Nevertheless, we recognise the importance of specifically
managing some of the more transformative elements of
strategic execution as a Principal Risk. These elements include
mergers and acquisitions, business transformation
programmes and other growth initiatives, R&D, technology
and digitising our offering.
Our businesses face an ever-evolving landscape of information
security threats, both internal and external, that are
continuously growing in sophistication and unpredictability. In
light of the persistence of high-profile information security
breaches occurring across a wide range of businesses, the
Group takes a necessarily proactive and cautious approach to
safeguarding its information assets. Geopolitical tensions, the
ever-changing regulatory landscape and technology advances
such as generative AI introduce new and evolving risks that
necessitate constant vigilance.
Risk assessment scale*
• Very low
Risk appetite
• Highly cautious
Mitigation
Mitigation
• Low
• Moderate
• High
• Very high
* The combined impact and
likelihood of a risk occurring, net
of mitigation activities
• Cautious
• Balanced
• Opportunistic
• Highly opportunistic
Change in rating
Increase
No change
Decrease
New risk
• Remuneration policy aligned to incentivise delivery of the
• Information security and data privacy policies and a well-
strategy
• Deployment of the SBS
• Continued review of acquisition/merger pipeline, integration
processes and capability
• Regular reviews to track strategy execution
• Introduction of Vitality Index to track R&D effectiveness
• Structured approach to delivering business transformation
• Business Audit and Risk Committees
defined security controls framework
• Cyber risk assurance undertaken by Internal Audit
• Continued focus on ‘cyber fitness’ training across the Group
• Regular Board, and Audit and Risk Committee reviews
• Continued strengthening of IT systems
• Regular cyber-attack simulation exercises and penetration tests
• Systems in place to immediately isolate identified threats
• Cyber threat intelligence services and brand monitoring
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023
Principal risks and uncertainties continued
49
Compliance
Geopolitical
Market/financial shock
Definition
Failure to comply with laws and regulations, leading to
reputational damage, substantial fines and potential
market exclusion.
Definition
Material adverse changes in the geopolitical environment putting
at risk our ability to execute our strategy. Includes trade
protectionism, punitive tax/regulatory regimes, and general
heightened tension between trading parties or blocs.
Definition
Material adverse changes in market conditions, such as economic
recession, inflation, increased interest rates, sudden negative
investor sentiment and currency fluctuation.
Link to strategy
• Customer centricity
• Operational excellence
Risk assessment
Moderate
Change in rating
Risk appetite
Cautious
Impact
Link to strategy
• Aligned to structural growth markets
• Customer centricity
• Investing in growth
Link to strategy
• Great businesses
• Aligned to structural growth markets
• Customer centricity
• Investing in growth
Risk assessment
High
Change in rating
Risk appetite
Balanced
Impact
Risk assessment
High
Change in rating
Risk appetite
Balanced
Impact
We operate in many jurisdictions and, as a consequence, are
subject to wide-ranging laws and regulations, including export
controls, data privacy, fair competition and anti-bribery and
corruption. Any compliance failure by the Group or its
representatives could result in civil or criminal liabilities, leading
to significant fines and penalties or the disqualification of the
Group from participation in government-related contracts or
entire markets.
We operate in a range of end markets around the world and
may be affected by political or regulatory developments in any
of these countries. Material adverse changes in the political
environment in the countries in which we operate have the
potential to put at risk our ability to execute our strategy. We
continually monitor the geopolitical landscape, de-risk our
strategies and develop response plans accordingly.
As a public company, and one that conducts business in a
large number of markets, we recognise the global or local
impact that a recession or period of instability could have on
the Group. As with political risk, we are limited in our ability to
reduce the likelihood of such events, but with careful
monitoring and response planning we can ensure that the
potential impact is restricted.
Mitigation
Mitigation
Mitigation
• Strong cultural alignment to the Spectris Value of ‘Be true’
• Global implementation of new Code of Business Ethics
• Formal compliance programme including policies,
procedures and training
• Contract review and approval processes
• Investment in experienced compliance professionals
• Event monitoring and horizon scanning
• Working groups and sub-committees to limit the impact of
materialising risks, including Executive Export Controls
Committee
• Operate in a broad spread of geographical markets and end
users
• De-risking of relevant strategies
• Response planning
• Maintain a strong balance sheet
• Market monitoring and horizon scanning
• Maintain a strong balance sheet
• Operate in a broad spread of geographical markets and end
users
• Response planning
• Cost saving opportunities identified by SBS and regular
review of pricing to mitigate impacts of cost inflation
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
50
Principal risks and uncertainties continued
Talent and capabilities
Business disruption
Climate change
Definition
Failure to attract, retain, and deploy the necessary talent to deliver
Group strategy.
Definition
Failure to appropriately prepare for and respond to a crisis or
major disruption to key operations either across the Group, in a
key region/location, or via a critical supplier.
Definition
Failure to respond appropriately, and sufficiently, to climate
change risks or failure to identify the associated potential
opportunities in assisting others to manage their climate agendas.
Link to strategy
• Great businesses
• Customer centricity
• Investing in growth
• Operational excellence
Risk assessment
Moderate
Change in rating
Risk appetite
Balanced
Impact
Link to strategy
• Operational excellence
Risk assessment
Low
Change in rating
Risk appetite
Cautious
Impact
Link to strategy
• Aligned to structural growth markets
• Customer centricity
• Investing in growth
• Operational excellence
Risk assessment
Moderate
Change in rating
Risk appetite
Balanced
Impact
The Group needs to attract, develop, motivate and retain the
right people to achieve our operational and strategic targets.
Effective talent management is essential to successfully
delivering our current business requirements and strategic
goals, and to realising the full potential of our businesses.
Therefore, failure to leverage talent and capabilities could
significantly impact the successful execution of our strategy.
The three broad areas of focus are leadership, engineering and
entry level roles.
The nature of our geographically diverse and segmented
businesses provides a degree of natural hedging from
Group-wide disruption arising from a major event, be it a
physical disaster at a major site, or a global external event, such
as the COVID-19 pandemic. However, we acknowledge the
importance of proactively ensuring a consistent and effective
business continuity management process across the Group.
The transition and physical risks present in climate change
have the potential to impact the medium- and long-term
success of our business through market regulation and
additional taxes, the changing macroeconomic landscape and
the potential physical impact on our operations. We see the
potential for additional sales opportunities as well as increased
costs and investment.
Mitigation
Mitigation
Mitigation
• Structured recruitment and succession processes for senior
• Common policy and enhanced standard for business
Group talent
• Full deployment of Workday HR system with recruitment,
performance and talent management processes extended
to top 600 leaders and managers
• Annual organisation capability review process
• Appropriate incentives with benchmarking at all levels
• Global employee engagement programme
• Leadership development programmes to ensure
development of talent pipeline
continuity planning across the Group in progress
• IT disaster recovery plans
• Testing plans
• Risk identification and monitoring
• Effective internal and external communications
• Strategy built around sustainable growth
• Agreed action plan to meet Net Zero targets validated by the
Science Based Targets initiative
• Board and Executive oversight of sustainability performance
as well as progress against Net Zero roadmap
• Geographical diversity of businesses and supply chain
• Climate physical risks monitored and reported by each
business
• Aligning strategy with current and emerging sustainability
thematics
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023
51
Viability Statement
As part of their assessment, the Directors have considered
the natural hedging that occurs across the broad spread of
markets, products and customers maintained by the Group.
Assumptions have also been made in terms of the Group’s
ongoing ability to raise finance, deploy capital, and re-finance
debt in order to maintain sufficient headroom. In certain
instances, the Directors have included mitigation actions as
part of the assessment, including cost reduction, reduced
capital expenditure, and tactical recovery processes following
from a major disruption.
Reverse stress testing has also been applied to determine the
level of fall in sales that would be required before the Group
would be at risk of breaching its existing financial covenants
or current liquidity headroom during the assessment period.
The reverse stress test was conducted on the basis that
mitigating actions would be undertaken to reduce overheads
during the period as sales declined and, on that basis, a fall in
forecast sales of 38% (applied uniformly across the five-year
assessment period) would be required before such a breach
occurred. The Board considers the possibility of such a
scenario to be remote and further mitigation, such as
suspension of dividend payments or a reduction in planned
capital expenditure, should be available if future trading
conditions indicated that such an outcome were possible.
Viability Statement
Based on the outcomes of the viability assessment, the
Board has a reasonable expectation that the Group would be
able to withstand the impact of each of these scenarios, in
isolation and in a number of plausible combinations, should
they occur in the course of the five-year assessment period. In
each event the Group would continue to operate and meet its
obligations and liabilities as they fall due over the period to
31 December 2028.
Longer-term viability of the Group
In accordance with section 4, provision 31 of the 2018 UK
Corporate Governance Code (the Code), the Directors have
assessed the viability of the Company over a five-year period,
taking into account the Group’s current position and the
assessment of the Principal Risks and Uncertainties as set out
on pages 48 to 50. The assessment considers both the
Company’s long-term prospects and also the viability of the
Company over that period.
Analysis of business prospects
The Board has considered the prospects of the Company over
the assessment period based on the strategy, markets and
business model as outlined previously within this report. In
the strategic review of the Company, the Board highlights a
number of factors that underpin its prospects and viability
over this period. These include:
• alignment with structural, sustainable growth markets with
•
high barriers to entry ;
leading, differentiated solutions for solving customer
challenges and continued investment in R&D; and
• our financial model which is asset light, highly cash
generative and with a clear capital allocation process and
access to funding.
Assessment of viability
In determining the appropriate period over which to assess
viability the Board has considered budgeting, forecasting and
strategic planning cycles, the time frame within which we
assess our risks, the maturation of the Group’s credit facilities
and the approach taken by our peers. The assumptions and
forecasts used throughout the viability period are consistent
with those used in other areas involving future forecast. Taking
into account all these factors the Board continues to be of the
view that a five-year period is appropriate.
The Directors carried out a robust assessment of the Principal
Risks facing the Group, considering those that could threaten
its business model, future performance, solvency or liquidity.
In assessing the viability of the Group, the Board has reviewed
the future prospects of the business as outlined by the
Group’s strategy and considered the financial/liquidity impact
that a number of scenarios might have on those prospects.
The Board has also considered the Group’s RCF, which is due
to expire in July 2025 as part of its assessment. On the basis of
the Group’s continuing strong balance sheet and ongoing
support from its banking group, the Directors have assumed
for the purposes of the Group’s viability assessment that this
will be renewed before expiry in the same amount and with
the same covenant requirements.
Scenario modelled
Link to Principal Risks
Scenario 1:
Reduction in sales
The Board considered a number of
events that could notably impact
planned sales performance, either in
a specific country or across the
entire Group. This included global
disruption events.
The level of severity tested ranged
from c.1% to c.20% decline in sales to
a 100% decline in a specific country.
• Strategic transformation
• Geopolitical
• Market/financial shock
• Compliance
• Cyber threat
• Climate change
Scenario 2:
Significant costs or expenses
Large, one-time or recurring costs or
expenses were considered,
including the impact of inflation
where cost increases cannot be
passed on to customers, a
significant acquisition which fails to
deliver anticipated benefits, or fines
arising from a breach of export
control or data privacy laws and
regulations or climate impacts.
• Strategic transformation
• Compliance
• Geopolitical
• Market/financial shock
• Cyber threat
• Talent and capabilities
• Business disruption
• Climate change
The level of severity tested ranged
from c.6% cost increases, with
further cost inflation of 10% to
one-off costs of c.£200 million
relating to a significant acquisition
which fails.
Scenario 3:
Trading disruption/exclusion from market
The Board considered certain
instances in which the Group or
its operating companies might
be debarred from or otherwise
excluded from a particular market,
as well as a major disruption in a
critical operation caused by, for
example, a critical system outage.
• Compliance
• Cyber threat
• Geopolitical
The level of severity tested ranged
from c.£10 million to £30 million
costs of resolving the issues to a
decline in annual sales of
c.£20 million.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 52
Sustainability Report
Building our
business for
the future
We are evolving our approach to doing business
to meet the demands of a changing world. Our
stakeholders are at the heart of this evolution.
We are creating a strong foundation for our
future based on our stakeholders’ needs and
expectations. In 2023, we have advanced our
ambition to become a leading sustainable business.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Sustainability Report continued
Our planet
Our value chain
Total carbon
emissions
(tonnes CO2e)1
12,144
2022: 17,546
2021: 31,703
Energy Efficiency
(MWh per £m
revenue)
48.9
2022: 58.2
2021: 73.7
Total use of
renewable energy
Renewable electricity
in the UK
31.9%
2022: 22.6%
2021: 10.9%
100%
2022: 100%
2021: 95%
Gender diversity
in leadership
population
Access to an
employee assistance
programme
28.7%
2022: 20.3%
2021: 18.6%
86%
2022: 82.2%
2021: >75%
Total recordable
incident rate
0.31
2022: 0.27
2021: 0.32
Safety
observations
9,528
2022: 8,900
2021: 5,243
The way we do business matters to us. We
recognise that continually developing the
ethical and social culture of our organisation
and demanding the same high standards
from our partners and suppliers, builds trust
with all our stakeholders. This approach
supports our business model and the
successful execution of our Strategy to realise
long-term, sustainable growth. In 2023,
we made significant progress through the
launch of our new Supplier Code of Conduct
and in engaging our suppliers through the
EcoVadis platform.
Read more about our new Supplier Code of
Conduct on page 59
Our society
STEM is a key priority for us. We have initiated
key programmes to reach today’s young
talent in a way that they appreciate and
recognise to ensure that the best talent joins
Spectris. We are focused on bolstering our
talent pipeline and supporting our employees
to give back to their profession. Beyond this,
we recognise our opportunity to influence
the world of STEM education and to build
opportunities for young people in science,
and to make a wider difference to society.
Read more the progress of the
Spectris Foundation on pages 78 and 79
We recognise and embrace our role in
tackling environmental degradation and
climate change. We do this through providing
products and services that reduce our
customers’ environmental impact and by the
active management and mitigation of the
impact of our own operations. We continue to
make very strong progress in our ambition to
become Net Zero across our own operations
by 2030 and across our value chain by 2040.
Read more about our progress towards
Net Zero on pages 62 and 63
Read more about our developing approach
to climate risk on pages 66 to 76
Our people
The long-term success and sustainability
of our Group relies on the engagement,
ambition and expertise of our people. We are
committed to providing a safe and healthy
working environment. In 2023, we have
also further progressed our approach to
engagement, talent, development, inclusion
and mental health.
Read more about our progress
on pages 54 to 61
1. Absolute scope 1 and 2 (Market-based) emissions.
53
Ethics: number of
helpline reports
84
2022: 44
2021: 40
Group supplier
spend rated via
EcoVadis
26.9%
2022: 13.9%
Total number of
students reached by
Spectris Foundation
43,099
2022: 21,698
Total donations agreed by
Spectris Foundation
£1,365,000
2022: £551,800
Find out more about the
Spectris Foundation online
www.spectrisfoundation.com
Origional colour wayOrigional colour waySPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
54
Sustainability Report continued
A values-driven
culture of
healthy high-
performance
We want our people to be happy, to be fulfilled by what they do,
and to have the right skills for success. We are committed to
creating a values-driven, healthy high-performance culture. A
workplace with engaged, highly skilled teams that are
recognised and rewarded for their contribution accelerates our
Purpose to make the world cleaner, healthier and more
productive.
We are focused on ensuring that our
people have the rights skills to build
meaningful, long-term careers and to
build the collective capabilities that we
need to achieve our strategic ambitions.
We are proud of the progress made on
our people strategy. Our Values, our
approach to engagement and our
leadership model have formed a distinct
and strong foundation to develop our
employee value proposition.
We are committed to continuous
improvement and regularly review the
effectiveness of our people practices
within the context of the ever-changing
external environment and the evolving
world of work. Our approach is
underpinned by the development of
our people data and diagnostics
through the active use of Workday to
enable smarter and more agile
decision-making, and to help us
predict the talent we need in the future
so that we put the right plans in place
today.
Boosting our Values
Our Values are an integral part of our
cultural DNA. They define how we act
and what we expect from each other.
Our three Values Be True (integrity),
Own It (accountability), and Aim High
(ambition) reflect who we are as
employees of Spectris.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 55
Sustainability Report continued
Our Values are an integral part of the Spectris
culture. They are woven naturally into
everything we do and bring us together as a
community. They are also the core of our
leadership development programmes. But
we don’t just assume the work is done, and
through structured interventions we keep our
Values real, ensuring they remain fresh and
have an ongoing relevance to our people.
In 2023, we rolled out a Values Booster
programme across our teams in Asia to bring
our Values even more to life, ensuring the
right behaviours are recognised and the
wrong behaviours are called out. This
interactive programme presented managers
with a number of challenging scenarios and
encouraged an honest exchange of views
and the sharing of real-life experiences. As a
result of the programme, 95% of participants
agreed that they are now better equipped to
bring the Values to life in their teams.
95%
of participants in the Values Booster
programme agreed that they were now
better equipped to bring the Values to life
in their teams
Putting real value on talent
Having the right people, with the right skills in
the right role at the right time is critical to
achieving our operational and strategic
priorities. We’ve made major enhancements
to how we manage talent over recent years
and are continuing to review how we can
maximise the strategic value of our most
important resource: our people.
We are concentrating on identifying the
talent we need, building our capabilities to
deliver our strategic ambitions. We identify
the roles most vital to developing these
capabilities and ensure appropriate plans are
in place to create a sustainable talent pipeline
for those roles.
In 2023, we have made enhancements to
how we evaluate potential through the
organisation. We have improved our
approach to succession planning to ensure
we look deeper into the business to identify
talent and offer opportunities to grow.
We continue to build greater dialogue across
the organisation to break down any functional
and geographical barriers to talent
development. Our approach is creating
transparency and helping us match the right
people to the right jobs at the right time;
ensuring that we build our strategic
capabilities whilst further opening up
opportunities for our people.
Building manager accountability for
employee engagement
We continue to make encouraging progress
on our journey to creating a high-
engagement culture. The results from our
third Gallup annual employee engagement
survey demonstrate the success of our
approach while also highlighting the
opportunities for further improvement.
In 2023, a key focus has been supporting
people managers to take accountability for
action-planning based on their survey results.
We measured the difference in engagement
scores for teams whose managers undertook
active action planning with their teams and
highlighted the real difference this makes to
how connected people feel to the company
culture, their work and their colleagues.
All managers are required to take
accountability for driving engagement in
their teams. Every manager is expected to
have open and honest discussions about
what’s working well, and what could be
better. Action plans are agreed and driven at a
team level with leaders encouraged to
regularly review progress and course-correct
when needed.
We are recognising and celebrating
managers who have built highly engaged
teams, while providing targeted coaching and
support to those who need help to improve
engagement. In this focus, we recognise that
great managers are the key ingredient for
success in our engagement journey and we
are focusing on helping our managers to
become role models of engagement.
Employee turnover
2023
2022
2021
10.6%1
13.5%
15.6%
2020
13.6%
2019
11.4%
1. Of the total labour turnover, 58% of leavers were
resignations, 14% were retirements and 8% were
redundancies with the remaining 20% leaving for a
variety of other reasons.
Employee engagement (GrandMean)
3
4
5
2023
2022
2021
3.92
3.86
3.72
Spotlight
Developing leadership
Building a values-based healthy high-
performance culture requires a leadership
population equipped with the right
behaviours, skills and knowledge. Being a
leader at Spectris means knowing how to
build great teams; enabling them to play
to their strengths, modelling our Values
and inspiring them to do great things. We
continue to build future leaders through
various management programmes across
our businesses.
In 2022 we launched our global leadership
programme, Ascend, and our first cohort
graduated in May 2023. This 100% virtual
and highly interactive course is built
around the themes of our leadership
model, helping leaders inspire their
people, strengthen their teams and grow
the business. The programme has received
really positive feedback from participants
and those who work with them, with
nearly 90% of participants’ managers
agreeing that they have become better
leaders because of what they learned.
The second cohort of leaders began their
Ascend programme in September 2023.
Many of the graduates from the first cohort
are acting as mentors – providing practical
guidance on how best to apply the learnings
from the programme in their leadership roles
and wider day-to-day life.
90%
of participants’ managers agreed that they
have become better leaders following their
participation in the Ascend programme.
“A truly remarkable leadership
course. Really well planned,
structured, organised and
delivered. It was a joy to attend
and so much of the content
will stay with me. I feel
privileged to have been
in the first cohort.”
Anna-Lisa Miller
Group CIO
VOICES OF EXPERTISESPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
56
Sustainability Report continued
We are committed to building a
diverse and inclusive business
To build our business for the future, we
need the best team, a diverse mix of
people and skills, where different ideas
can grow, and where everyone can
succeed. Our ambition to reflect the
full diversity of the communities in
which we operate and trade is
therefore essential - but we also
recognise that creating true diversity is
challenging and building an inclusive
culture is a continuous journey.
In 2023, we reached the milestone of 40% of our
Board being comprised of women, reflecting
the target set by the FTSE Women Leaders’
review. This year we also made good progress
in improving gender diversity in our senior
leadership population, attracting, promoting
and retaining more diverse talent. As at the
end of 2023, 28.7% of our senior leadership
population are women (2022: 22%). In
recognition of the importance of growing the
gender diversity in our leadership population,
we have set an ambition that by 2030 40% of
our senior leadership population will be
women. To reach our ambition, we are taking
targeted action, including:
• embedding tailored diversity, inclusion and
belonging dashboards in our Organisation
Capability Review process which is reviewed
annually by the Group Executive and Board;
• commencing the review of Group-wide
policies to support gender-neutral parental
leave and caregiver leave;
• the active development of inclusion groups
across the Spectris Dynamics Division;
• reviewing the Group’s recruitment practices
to ensure they contain suitable safeguards to
avoid unconscious bias; and
• joining the 25x25 initiative, working with
like-minded peer companies to explore the
pathways to developing diverse talent.
fuller picture of our existing diversity, to create a
baseline to measure progress, is challenging
and we are cognisant of the varying laws and
regulations that limit, and in some cases
prohibit, us requesting diversity data, and
notably ethnic diversity data from employees.
Developing our baseline data within these
constraints is a key focus for the Group in 2024.
At the same time, we recognise the importance
of developing ethnic diversity, and wider forms
of representation, across our leadership
population and wider workforce. In 2023, we
took early steps towards voluntary reporting of
ethnic diversity data in compliance with the
requirements of the Parker Review. Our Board
composition is compliant with the Review and
as requested by the Review, we have set a
target to ensure that 10% of our UK leadership
population is ethnically diverse by 2027.
While we agree with the spirit of the Parker
Review, setting this target does not fully reflect
the challenge the Group must overcome to
create an ethnically diverse senior leadership
community across the world. With employees
in over 30 countries, our ambition is to ensure
our leadership community fully reflects and
represents our employee base and the
geographies in which we operate. In particular,
we recognise the need to develop leadership
pathways for our employees based in Asia. We
believe that, by fully reflecting the geographic
diversity of the Group in our leadership
community, we will be building authentic
ethnic diversity, that truly reflects the necessary
diversity of thought and experience the Group
needs to build a sustainable future. Building a
We are evolving our culture to encourage a
mindset and behavioural shift on inclusion
and belonging at all levels of our organisation.
Beginning with the rollout of the PwC
immersive virtual reality experience, ‘In My
Shoes’, to the global senior leadership
population and head office employees. We
have developed a programme of work to
ensure that we build a future-focused inclusive
organisation where every employee can feel
that they belong. During the year, our Divisions
progressed the establishment of employee
resource groups to complement our Group-
wide work. These resource groups have been
instrumental in advising regional management
on a range of topics to help deliver real change
in our employee experience.
Our ambition to build a more diverse company
and a more inclusive culture is underpinned by
the commitments set out in our Code of
Business Ethics. We have a zero-tolerance
policy in place for any form of discrimination or
harassment and we are committed to
embracing diversity and inclusion across the
Group. We aim to provide equal opportunity in
recruitment, career development, promotion,
training and reward for all employees –
regardless of ethnicity, national origin, religion,
gender, age, sexual orientation, marital status,
disability, or any other characteristic protected
by applicable laws. Where existing employees
become disabled, our policy is to engage
and use reasonable accommodations or
adjustments to enable continued employment.
Gender diversity in senior leadership
28.7%
(2022: 22%)
Percentage of women on the Board
40%
(2022: 33%)
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Sustainability Report continued
In December 2023, the Group was proud to join the 25x25
initiative, joining other UK listed industrial peers to create
new and defined pathways for women to reach the role
of CEO. The initiative recognises that the concept that
talented women will ‘bubble-up’ into senior positions by
virtue of volume is unproven and a clearer focus is needed
on the early identification of talent and the formation of
clear progress routes. We are pleased to be working with
peer companies in our sector who are managing similar
demographics, career disciplines and geographies to
enhance gender diversity across the industrials sector.
“25x25 resonates deeply with our Values of
equity and inclusion. By working with our peers,
we aim to drive positive change within Spectris,
across our industry, and through the entire
business community.”
Andrew Heath
Chief Executive
57
Employees by gender and role
as at 31 December 2023
Gender pay gap reporting
for the year ended 31 December 2023
Board
Leadership community
Bonus pay gap: Mean
Gender pay gap: Mean
6
71%
11.7%
(2022: 37.2%)
11.5%
(2022: 21.7%)
Bonus pay gap: Median
Gender pay gap: Median
11.2%
(2022: 31.6%)
15%
(2022: 18.6%)
Total 10
29%
Total 100%
4
(2022: Male: 6 Female: 3)
(2022: Male: 80% Female: 20%)
Executive Committee
(Incl. Executive Directors)
Wider employee population
5
67.14%
2
Total 7
Total 100%
32.86%
(2022: Male: 5 Female: 2)
(2022: Male: 65.99% Female: 34.01%)
Data required under the UK Listing Rules on gender and
ethnic diversity can be found on page 125.
Our Board Diversity Policy sets out our ambition for building
and maintaining diversity in our senior leadership population.
Find out more about our diversity policy online
www.spectris.com/buiding-a-sustainable-business/people/
diversity-and-inclusion/
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
58
Sustainability Report continued
Living by our Values
Employees completing refresher training
in 2023
96%
(www.spectrishelpline.com) that employees,
stakeholders and third parties can use to
raise ethics and compliance questions and
concerns. Our Spectris helpline cases are
reviewed and triaged appropriately to ensure
sufficient investigation, reporting and
remediation activities are carried out.
The Audit and Risk Committee receives
regular updates on the Group risks identified
through our helpline cases with the Board
undertaking an annual review.
During 2023, the total number of reports
received by the Spectris helpline was 84
(2022: 44) and, after investigation, 29 of
the reports were substantiated. This is a
significant increase from the case numbers
reported in 2022 and reflects both the
emphasis placed on encouraging employees
to raise concerns and the heightened
awareness and willingness among employees
to speak up. Disciplinary action was taken
against 26 individuals based on the severity
of the misconduct identified: final warning
(1 person): verbal feedback (6 people); written
warning (7 people); resignation in lieu of
notice (2 people); suspension (1 person);
performance improvement plan (1 person);
termination mutual agreement (2 people);
termination with cause (4 people); warning
(1 person) and verbal warning (1 person).
At Spectris, we uphold our Values
of Be True, Own It, and Aim High,
which embody the traits and
behaviours we strive for when
conducting our business.
The foundation of our ethical standards is
reflected in our Code of Business Ethics which
sets out the expectations and responsibilities
for all employees to act with absolute
integrity. This is embedded through annual
Code of Business Ethics refresher training,
with 96% of employees completing this
refresher training in 2023.
We are committed to maintaining high
ethical standards in all our global operations,
and we expect our suppliers and other
business partners to adhere to the same
principles. Our third-party risk management
processes require export controls and
sanctions screening, and regular assurance
activities, the effectiveness of which is
overseen by the Board and Executive
Committee.
Speak Up
We are dedicated to fostering a culture of
‘speak up’, encouraging individuals to freely
voice their concerns and to call out
behaviours that do not align with our Values.
We acknowledge the significance of ensuring
that those who speak up feel supported and
at ease and provide assurance through tone
from the top and our network of business
ethics officers. We offer multiple routes to
speak up including an independent helpline
Spotlight
Ethics
Number of helpline reports received
2023
84
2022
44
2021
40
2020
37
2019
54
Spectris Ethics Week:
Nurturing a culture of
integrity, transparency
and respect
In an initiative to reinforce its commitment
to ethical practices, Spectris organised
an Ethics Week, which involved a
dedicated series of events and discussions
across our Group that delved into crucial
topics such as organisational culture,
the ethical implications of AI, and the
importance of fostering a culture of open
communication through the ‘speak up’
ethos. The week also provided an
opportunity for our businesses to
recognise individuals who were nominated
for their exceptional efforts in exemplifying
our Values through their dedication to
ethics and compliance initiatives.
Our Values
Be True
We believe in absolute integrity.
It’s how we win for stakeholders, the
environment and each other.
Own It
We believe in teamwork and keeping
our promises. It’s how we build our
brands and businesses.
Aim High
We believe in being bold and positive.
It’s how we perform at our best and
achieve greater success.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023
59
Sustainability Report continued
Committed to sustainable
supply chains
Suppliers are expected to support and
respect all internationally recognised human
rights in any part of its supply chain. These
are those expressed in the International
Bill of Human Rights and the principles
concerning fundamental rights set out in
the International Labour Organization’s
Declaration of Fundamental Principles and
Rights at Work from time to time in force.
Suppliers must actively identify and address
potential violations across their own
operations and throughout their value chain.
We are confident that by collectively
embracing the standards in our Supplier
Code with our supply chain, we will
strengthen our global impact and reinforce
our position as a leading, sustainable business.
We are committed to doing
business in the right way, mindful
of our impact on the communities
in which we operate and wider
society. This commitment is
underpinned by our membership
of the UN Global Compact.
We are very conscious that one of the biggest
sustainable impacts we can have is through
our supply chain. In 2023, we have taken
meaningful steps forward in managing that
impact through the publication of our new
Global Supplier Code of Conduct.
This Supplier Code underpins our
commitment to ethical business practices
and sustainable supply chains. The Supplier
Code serves as the foundation of our
operations, outlining the minimum
standards we expect from our valued
supply chain partners and how we would
like them to work with us to fulfil our wider
sustainability ambitions.
The Supplier Code outlines our commitment
to integrity, transparency, and responsibility
and it provides a comprehensive framework
that guides our interactions with suppliers
and reinforces our core values of Be True, Own
It and Aim High. The Supplier Code works in
tandem with Our Code of Business Ethics,
creating a robust foundation for our business
practices. We require that all suppliers
commit to the highest standards of ethical
conduct when dealing with their workers,
suppliers and customers.
Spotlight
Malvern Panalytical supplier spend rated
via EcoVadis
66.7%
HBK supplier spend rated via EcoVadis
24.2%
Monitoring supplier
performance
We are committed to monitoring the
environmental, social, and ethical
performance of our supply chain. We
manage this through the EcoVadis
platform with 66.7% of Malvern Panalytical
and 24.2% of HBK spend currently
assessed. In 2024, we will extend the
EcoVadis platform to Servomex and PMS.
The annual external verification of our
supplier data provided by sustainability
experts and reporting dashboards
provided through the EcoVadis platform
allow us to take informed decisions on the
use of suppliers and to build an ongoing
dialogue to ensure our sustainability
ambitions, including our Net Zero
ambition, are reflected in our supply chain.
Read more about our Global Supplier
Code of Conduct
www.spectris.com/buiding-a-sustainable-
business/ethical-business/supplier-code-of-
conduct/
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
60
Sustainability Report continued
A safety-first culture
The Group is committed to the
highest standards of health and
safety and maintaining a proactive
safety culture. We adhere to all laws
and regulations governing safe
working practices and often go
beyond local legal requirements
to ensure that the policies and
practices at our sites and the
behaviours of our people are
driving towards a zero-accident
safety culture.
Total recordable incidents
There were no work-related fatalities of
employees or contractors in 2023 (2022: nil).
Our key performance indicator is our Total
Recordable Incident Rate (TRIR) as defined
by the US Occupational Safety and Health
Administration. The TRIR increased in 2023 to
0.34 (2022: 0.26). All events were thoroughly
investigated at a site level, and corrective
actions shared and implemented across
the Group.
The Group’s Health and Safety Committee
has taken time to review and assess the
increase in recordable incidents. In 2023,
there was a marked increase in recordable
incidents caused by non-routine tasks,
representing around 20% of total recordables
in the year. The variation in the mix of
incidents compared to the prior year has
highlighted the challenge of low-risk events
leading to recordable incidents, such as cuts
and grazes. The development of a clear and
consistent approach to reporting health and
safety incidents is also considered by the
Committee to be a contributory factor to
the rise in recordable incidents. We are
committed to creating a culture in which
our people are empowered and encouraged
to challenge their environment and take
action for improvement and as we build
awareness, we do expect some increase in
recordable incidents as employees better
understand reporting processes. We expect
that this trend will be reversed as we
challenge the root causes of these incidents
through the continued reinforcement of our
safety principles.
Safety observations
The Group continues to also measure the
leading indicator of safety observations as a
core value driver across the Group. Creating
a culture where everyone is responsible for
their own safety and the safety of those
around them aligns with our Values and is
the foundation of a safety-first culture. In
2023, our safety observations increased to
9,528 (2022: 8,900), with observations
recorded through the Global Benchmark
system and acted on locally, with thematic
reviews undertaken by the Group’s Health
and Safety Committee.
To further support the development of the
Group’s safety-first culture, the Committee
leveraged the experience of members and
the findings from incident investigations
to create a guide of best practice that has
been shared across the Group. A further
key success was the introduction and
endorsement of a suite of online training
modules focused on specific needs at key
sites with the intention of addressing localised
safety gaps and placing health and safety at
the centre of daily decision-making.
Spotlight
Safety observations
9,528
(2022: 8,900)
Total recordable incident rate
2023
2022
2021
2020
2019
0.34
0.27
0.32
0.13
0.24
Safety-first culture
aligned to our Values
As an integral aspect of our safety-first
culture, a key focus for 2023 was the
implementation of a comprehensive
Group-wide Health and Safety Policy. The
Policy is aligned with the Group’s values
and was supported by a Group-wide video
communication, reaffirming the Group’s
commitment to a safety-first culture. The
Policy was launched by Andrew Heath and
Ben Bryson, in his capacity as leader of
the Health and Safety Committee, and
confirmed that of all our ambitions as a
Group, our first priority is the health,
safety and wellbeing of our people. The
communication also highlighted that
every safety observation made is a
reminder that we all have a responsibility
to call out risks and intervene when we
see something is unsafe.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Sustainability Report continued
Prioritising mental health
61
We are committed to creating a
positive and open culture around
mental health.
It is crucial that we cultivate an environment
where mental health is a continuous and
open topic of discussion, where seeking
support is encouraged, and where there is
always a network of individuals and
programmes that are ready to provide help
and guidance. This focus underpins the
development of our healthy, high-
performance culture.
The Group’s culture is formed by the
behaviour of our leaders. In October, we
invited David Beeney to our Leadership
Conference for a second year to speak with
the leadership community on the importance
of creating a healthy culture to deliver high
performance. Leaders were reminded about
the key techniques to open discussions and
their important role in creating a safe space to
talk about mental health.
Spotlight
In October we also marked the third year of
our celebration of World Mental Health Day.
During this time, we organised global
wellbeing sessions in several languages,
aligned to our ‘Time to Talk’ campaign. These
sessions addressed various aspects of
well-being and mental health, including the
important aspect of financial wellbeing,
resilience and support for working parents.
In 2023, we worked with HSBC to provide
financial wellbeing seminars and advice to
employees, and in 2024 financial wellbeing
will be a continued focus across the Group.
By collectively prioritising positive mental
health, we are building stronger, more
resilient, and more compassionate teams.
Access to an Employee Assistance
Programme
86%
2022: 82.2%
A healthy high-performance culture in action
During 2023, we continued to drive our
Group-wide mental health campaign ‘Time
to Talk’. Significant strides were made across
the Group to focus on the mental wellbeing
of our workforce, ensuring our people both
receive support and recognise their role in
creating our culture. Some highlights and
achievements were:
• Spectris China was awarded the status of a
Gold Standard Certified Company through
the 2023 China Corporate Health
Management Forum, organised by the HR
Excellence Center – one of the China’s
largest and most influential membership-
based networks for HR professionals.
• Malvern Panalytical launched a new
Employee Assistance Programme which
provided support in geographies not
previously covered ensuring that all
employees now have access to
independent, confidential and
professional support.
• Employee Assistance Programme
coverage in Asia reached 100% of
employees, including all manufacturing
plants.
• Servomex were awarded the Gold
Wellbeing at Work Award through East
Sussex Public Health.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 6262
Sustainability Report continued
Reaching
Net Zero
Our Net Zero commitment is ambitious and is
supported by our targets which are validated by
the Science Based Targets initiative against a
1.5°C warming scenario. We have made
meaningful progress towards our ambition,
reflected in our A- CDP score awarded in 2023.
Our roadmap
Since setting our Net Zero ambition in 2021, the Group has
focused on identifying and implementing emissions and
energy-saving initiatives in our operations, guided by the
Schneider Electric-led emissions and energy efficiency
assessments completed in 2022. Our approach is clearly
detailed in our Roadmap to Net Zero, with nominated leaders
within each of the businesses responsible for introducing
initiatives aligned to their bespoke roadmaps. In scopes 1 and 2,
energy efficiency measures have been introduced at many of
our manufacturing sites, supported by the installation of on-site
solar generation. Meanwhile, on scope 3, we have focused on
building supplier engagement through the use of EcoVadis, as
well as developing our approach to product sustainability
through life cycle assessments. We have committed a
minimum of £3 million per annum to fund our ambition,
spending £3.2 million in 2023.
Scope 1 and 2 – Our Roadmap
Scope 3 – Our Roadmap
Self
generation
at owned
sites
Renewable
energy
procurement
(PPA/tariff)
Energy
efficiency/
employee
engagement
Natural
refrigerant
replacement
Biofuels
onsite
Electric
vehicles
Neutralisation
100%
100%
Where we
are now
(2020)
13%*
45%
50%
0% Net Zero
16%
2%
1%
9%
* In addition to existing self-generation at Malvern and Eindhoven
In 2023, initiatives introduced across our largest global
manufacturing sites have enabled a 27% like-for-like reduction
in scope 1 and 2 (market-based) emissions since 2022. The
case study on the following page highlights some of the key
successes towards achieving this reduction from across the
Group. In 2023 we also took steps to improve the quality of
data used for tracking electricity and natural gas consumption
through the commencement of the installation of real-time
energy monitoring leading to emissions reductions through
more granular energy management.
Key activity in 2023
• Solar generation capacity installed at Malvern, Royston and
Crowborough
• HBK’s Darmstadt and Suzhou achieved 11.2% year-on-year savings
in energy consumption largely through optimisation and upgrade
of HVAC
• Installation of real-time energy monitoring at Almelo and
Eindhoven
• Installation of intelligent lighting and LED at Eindhoven, Almelo
and Crowborough
• PMS has now transitioned 38% of its fleet to electric and hybrid
Planned activity for 2024
• Continued roll-out of renewable energy generation at key
manufacturing sites, including Darmstadt, Marlborough, Almelo,
and Malvern
• Continued roll-out of real-time energy monitoring at key
manufacturing sites
• Expansion of electric vehicle and hybrid vehicle use in line with our
EV100 commitment
Supply chain
engagement
plus product
circularity
43%
100%
100%
Where we
are now
(2020)
50%
Product
efficiency
Air-freight
reduction
Business
travel policy
Waste
reduction
External
influence
Neutralisation
6%
1%
1%
1%
22%
26%
14%
0% Net Zero
In 2023, we have continued to focus on progressing supply
chain and product sustainability as the two key levers of our
scope 3 roadmap across the Group.
For supply chain, our partnership with EcoVadis has enabled
us to capture actual emissions data from suppliers. In 2022,
we began this work in Malvern Panalytical, which has now
captured 66.7% of its purchasing spend within the EcoVadis
supplier engagement programme (2022: 43.1%). In 2023, we
expanded the programme in HBK, which has now captured
24.2% of supplier spend. This data has supported the move
to a supplier-specific methodology for calculating supplier-
related emissions in our scope 3 reporting, as set out on
page 64.
For product sustainability, Servomex has completed the
design of a sustainable product taxonomy with the support of
Finch and Beak, the results of which have been used to inform
Servomex’s product roadmap. The results have also been
incorporated into our scope 3 emissions reporting with the
support of EcoAct, to allow us to move some of our reporting
to the supplier-specific method, the most accurate method of
reporting. In 2023, the approach has now been expanded to
PMS, which has designed its own sustainable product
taxonomy with Finch and Beak for two representative
products: Airnet II, and Chem 20.
Planned activity for 2024
• Expand EcoVadis programme to PMS and Servomex
• Commence a supplier engagement programme with key suppliers
based on the outcome of the EcoVadis programme
• Expand product lifecycle assessments across the remainder of the
Group
• Completion of zero-waste-to-landfill audits at key sites
Our ambition:
Spectris operations
Net Zero by 2030
(scope 1 and 2 emissions)
Our value chain
Net Zero by 2040
(scope 3 emissions)
Read our full
Net Zero roadmap
www.spectris.com/assets/
Uploads/Documents/
Roadmap-to-Net-Zero/
Roadmap-to-Net-Zero.pdf
Reaching Net Zero
Baseline
Divestments
and
Adjustments
Savings
Achieved
to date
Planned
Savings
Remaining
100%
44%
25%
13%
18%
50k
40k
30k
20k
10k
0
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023
63
Sustainability Report continued
Sustainability continued
Sustainability continued
Case study
Net Zero success from around the Group
In 2023, we have seen progress across our
businesses as Net Zero has increasingly
become embedded into our operations and
culture. This has included implementing
some of the outcomes of the Schneider
Electric energy and emissions efficiency
assessments. The adjacent case study
presents some of the main highlights from
2023 from each of our businesses, focusing
on the successes at some of our key
manufacturing sites. In 2024, we will be
continuing to build on the success of 2023,
guided by the development of our Net Zero
Transition Plan, and sharing learnings across
the Group as we transition to Net Zero.
% of suppliers by spend captured by
Malvern Panalytical in EcoVadis
66.7%
Year-on-year energy savings achieved at
HBK Darmstadt and Suzhou
11.2%
HBK
Darmstadt and Suzhou, representing 56.8%
of HBK's total 2023 carbon emissions, both
have local energy management teams
working with the site lead and Net Zero
focal point to create and implement a raft of
energy-saving ideas. These ideas include
changing lightbulbs for LED and motion-
sensing replacements, and upgrading
air-conditioning units, to adjusting
production processes involving ovens for
heating to optimise energy use whilst
maintaining, and enhancing, product
quality. In 2023, Darmstadt was awarded
‘Site Energy Saver Of the Year’ at HBK due to
achieving the largest reduction in emissions
of all of HBK’s sites in the previous year.
Suzhou has also managed to reduce its
electricity and steam consumption by 10%
year-on-year. HBK has saved around
£0.3 million at Darmstadt and Suzhou
compared to 2022 through these initiatives.
“The site-based teams at HBK are
making a huge difference to our
energy consumption and CO2
emissions – it's a real honour to
guide and support them.”
Lawrence Grasty
Director – Net Zero, HBK
Servomex
In 2023, our Crowborough site made
significant improvements in energy efficiency
through the installation of a new high
efficiency cleanroom HVAC, expected to
save 3% of its electricity consumption per year,
and the installation of LED lighting (expected
to save 3.5% of electricity consumption per
year). In addition, they have installed solar
panels on the roof which is estimated to
provide 15% of the site’s electricity demand.
This progress has helped it towards achieving
an EcoVadis gold award for the second year
running, and being shortlisted for two awards
at the Energies Industries Council 2023
National Awards Dinner.
Particle Measuring Systems
PMS has been powered by 100% renewable
electricity since 2022, and has successfully
transitioned more than one-third of its fleet to
electric and hybrid vehicles. The team in
Boulder has reduced waste generated in
operations by 40% year-on-year driven by
better measurement and monitoring of
waste and identifying recycling opportunities.
In 2023, PMS also made progress in
developing sustainable packaging for their
products, including eliminating unnecessary
packaging and using recycled materials
where possible.
Malvern Panalytical
In 2023 Malvern Panalytical have worked
to embed multidisciplinary approaches
further into its approach to sustainability.
Teams across R&D, facilities, HR, finance,
and IT came together to hold kaizens to
identify sustainability solutions at Almelo
and Eindhoven for reducing scope 1, 2 and
3 emissions against the Group's Net Zero
ambition. The kaizens led to around 90
projects being identified ranging from
LED and intelligent lighting installations to
IT waste reduction initiatives. The projects
are now being distributed to different
teams and the work so far has contributed
to a 17.1% reduction in energy consumed at
Almelo in 2023.
Estimated annual future savings made
by HBK
£0.3 million
through energy-saving initiatives at
Darmstadt and Suzhou
Red Lion Controls
Red Lion Controls led a literature reduction
project to reduce the number of pages
included in its product boxes, which will
also help their customers to reduce their
own waste. Thanks to the expertise of the
working groups at Red Lion Controls,
spanning the regulatory, product,
management, engineering, legal and
technical documentation teams, it was
able to reduce the number of pages
included in product boxes by over 90%,
saving 1.3 million printed sheets of paper
per year.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 6464
Sustainability Report continued
We are committed to transparent reporting of our carbon footprint
and our transition towards Net Zero.
Environmental
reporting
Restatement of comparative
environmental data
Comparative data disclosed on page 65 has
been restated to reflect the following
changes:
Environmental performance summary (absolute)1
Energy consumption
(MWh)
70,878
(2022: 77,194)
(2020: 123,205)
Energy efficiency
(MWh per £m revenue)
48.9
(2022: 58.2)
(2020: 92.2)
Greenhouse gas emissions
(tonnes CO2e)2
Total carbon emissions
(tonnes CO2e per £m revenue)2
12,144
(2022: 17,546)
(2020: 43,111)
8.4
(2022: 13.2)
(2020: 32.3)
1. Numbers stated reflect in-year reported emissions to measure the evolution of the energy efficiency of the
Group, including the impact of portfolio changes on our efficiency.
2. Scope 1 and 2 (market-based) absolute emissions.
• Removal of data relating to the divestments
of Concept Life Sciences which took place
on 31 March 2023, and addition of data
relating to the acquisitions of MicroStrain
and EMS which took place during
September 2023 and October 2023, to
support a fair comparison of the Group’s
in-year environmental performance. This
approach, in line with Greenhouse Gas
Protocol (GHG Protocol) guidelines and
consistent with reporting in 2020, will be
followed for all future material acquisitions
and divestments
• Replacing estimated data with actual data
where available for prior years
Scope 1 emissions
Scope 1 emissions have decreased by 5.4% on
a like-for-like basis during 2023. This is
primarily due to energy efficiency activities
across a number of our manufacturing sites,
including at Boulder, Almelo and Eindhoven.
Scope 2 emissions
Market-based scope 2 emissions have
decreased during 2023 by 35.3% like-for-like.
This has been primarily driven by the green
electricity secured at Suzhou. Energy
efficiency improvements across our
manufacturing sites have also contributed to
reducing our emissions from electricity and
steam. HBK in particular has achieved
significant emissions savings by increasing
the efficiency of steam and district heating
used at Darmstadt, Suzhou, and Virum.
Scope 3 emissions
This is the third year of reporting against all
relevant scope 3 categories, which in 2023 has
included category 15 (Investments) for the
first time as it is now considered material
following the investment in LumaCyte
in 2023.
In 2023, we further improved scope 3 data
quality by accelerating our move away from
a spend-based methodology to one that
uses supplier-specific emissions data, by
introducing more primary data for our
calculations of categories 1, 2, 11 and 12.
For our suppliers, we have used EcoVadis to
collect primary carbon emissions data which
is being used to calculate categories 1 and 2.
As of 2023, Malvern Panalytical has captured
66.7% of supplier spend in EcoVadis, and HBK
has captured 24.2% of supplier spend in
EcoVadis. EcoVadis use will be expanded to
PMS and Servomex in 2024.
For our products, Servomex and PMS have
developed life cycle assessments of their
product portfolios, with Servomex's results
now being incorporated into our calculations
of categories 11 and 12. The life cycle
assessments undertaken to date have
enabled the identification of emissions and
energy-saving opportunities through product
design and supplier engagement. This
approach will be expanded to Malvern
Panalytical and HBK in 2024.
Geopolitical challenges affected our ability to
move goods by ocean rather than air, whilst
business travel has continued to shift to
pre-pandemic levels, affecting our emissions
performance for logistics and business travel.
Streamlined Energy and Carbon Reporting
(SECR)
This is our fourth year of reporting in
compliance with the SECR regulations which
are designed to increase awareness of energy
costs and provide data to inform the adoption
of energy efficiency measures. In 2023, 3.8%
of our scope 1 and 2 (market-based) emissions
were generated in the UK.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 65
Sustainability Report continued
Environmental performance summary (absolute)1
Greenhouse gas emissions (tonnes CO2e) (like-for-like)3
Indicator
20231
20221
Base year
20201
Unit of measurement – tonnes CO2e
Change
2023
2022
Base year
2020
Energy consumption (absolute) (MWh)
70,877.6
77,194.3
123,205.0
Scope 1 *
Energy efficiency (MWh per £m revenue)
Greenhouse gas emissions (tonnes CO2e)2
Total carbon emissions (tonnes CO2e per £m revenue)2
48.9
58.2
92.2
Scope 2 – Location-based*
12,144.1
17,546.0
43,111.0
Scope 2 – Market-based*
8.4
13.2
32.3
Scope 1 & 2 (Location) total
1. Numbers stated reflect in-year reported emissions, to measure the evolution of the energy efficiency of the
Group, including the impact of portfolio changes on our efficiency.
2. Scope 1 and 2 (market-based) emissions.
– of which UK
Scope 1 & 2 (Market) total7
– of which UK
-5.4%
-4.2%
4,373.6
4,623.2
6,393.5
16,103.8
16,814.0
17,832.0
-35.3%
7,770.5
12,011.1
17,413.4
-4.5%
20,477.4
21,437.2
24,225.5
-12.0%
-27.0%
-30.2%
1,144.6
1,300.9
1,391.5
12,144.1
16,634.3
23,806.9
461.1
660.7
1,367.1
7. 11% of scope 1 & 2 (location-based) emissions and 11% of total energy data has been accrued or estimated as per
the methodology detailed in the basis of reporting document available at www.spectris.com/environment.
Energy consumption (like-for-like)3,4
Scope 38(like-for-like)3
Unit of measurement – MWh
Change
2023
2022
Base year
2020
Change
2023
2022
Base year
2020
Electricity
– of which renewable
Natural gas
Fuel oil
Steam and other imported energy
Other fuels
Vehicle energy
Total energy*
– of which UK*
-5.5%
38,389.4
40,639.6
39,268.5
Category 1 – Purchased goods and services
-21.1%
168,313.7
213,441.8
162,104.6
16.9%
22,596.9
19,323.8
1.7%
5,503.3
5,408.9
17.7
17.8
2,966.0
6,049.7
28.4
Category 2 – Capital goods
(Included in Category 1)
Category 3 – Fuel & energy related activities*9
-8.3%
1,759.3
1,917.8
2,159.4
Category 4 – Upstream transportation / distribution*9,10
42.6%
22,243.9
15,595.5
20,822.9
13,047.5
14,879.8
13,930.2
Category 5 – Waste
288.8
354.3
64.4
Category 6 – Business travel*9
139.2%
95.7%
208.4
87.1
1,177.4
9,707.3
4,959.9
3,565.6
-0.4%
-12.3%
-18.5%
-0.8%
13,630.9
13,744.5
18,165.9
-5.6%
70,877.6
75,044.8
77,507.1
-25.7%
6,101.5
8,212.4
5,761.7
Category 7 – Employee commuting
24.6%
12,369.4
9,924.0
11,093.3
Category 9 – Downstream transportation / distribution
(Included in Category 4)
Category 11 – Use of sold products
3. All like-for-like numbers have been restated to reflect the divestment of Concept Life Sciences, and the
Category 12 – End-of-life treatment
acquisitions of EMS and MicroStrain during the year.
4. 11% of scope 1 & 2 (location-based) emissions and 11% of total energy data has been accrued or estimated as per
the methodology detailed in the basis of reporting document available at www.spectris.com/environment.
Category 15 – Investments
Total scope 33
-6.7% 246,422.3
263,984.7
210,613.2
170.8%
140.5
0.9%
3,946.6
51.9
3,911.7
50.0
68.8
-9.5%
465,111.4
513,874.3
411,655.1
Waste data (like-for-like)3
Total gross emissions (Market-based)
-10.0% 477,255.5
530,508.6
435,462.1
2023
2022
Base year
2020
8. Scope 3 categories 8, 10, 13, 14 are not included as not relevant to the Group’s business model.
9. In 2022, Deloitte provided independent third-party limited assurance against scope 1 and 2 emissions and scope
3. All like-for-like numbers have been restated to reflect the divestment of Concept Life Sciences, and the
acquisitions of EMS and MicroStrain during the year.
Total waste captured (tonnes)
4,083.8
1,649.4
4,824.6
3 (categories 3, 4 and 6). Those assured figures have been restated to reflect the divestment of CLS, and the
acquisitions of EMS and MicroStrain and have not been subject to further assurance in 2023.
122.4
3,447.9
10. Category 4 2022 emissions have been restated to reflect new data becoming available relating to our logistics.
– of which landfill
Waste recycling rate5
Waste diversion rate6
249.7
85.8%
93.9%
78.9%
92.6%
25.9%
28.5%
3. All like-for-like numbers have been restated to reflect the divestment of CLS, and the acquisitions of EMS and
MicroStrain during the year.
5. Proportion of waste recycled, including that of composted organic matter.
6. Proportion of waste diverted from landfill via recycling, composting or incineration.
*Data assurance and methodology
Deloitte has provided independent third-party limited assurance in accordance with the International
Standard for Assurance Engagements 3000 (ISAE 3000) and Assurance Engagements on Greenhouse
Gas Statements (ISAE 3410) issued by the International Auditing and Assurance Standards Board (IAASB)
over selected metrics, identified with *, within Spectris’ energy consumption and greenhouse gas (GHG)
emission disclosure. Deloitte’s full unqualified assurance opinion, which includes details of the metrics
assured, can be found at www.spectris.com/environment
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 666666
Sustainability Report continued
Key activity during 2023
Taskforce on Climate-related
Financial Disclosures (TCFD)
Governance
We have undertaken a comprehensive
programme of work to support our considered
view of the risks and opportunities present in
climate change. We have set out below our
Climate-related Financial Disclosures consistent
with all of the TCFD recommendations and
recommended disclosures in compliance with
Listing Rule 9.8.6R.1
Oversight of climate-related risks and opportunities
The Board oversees the delivery of the Group’s Strategy for
Sustainable Growth, a key priority of which is the
management of climate-related risks and opportunities.
Andrew Heath, Chief Executive, is the Executive Board
Director responsible for implementation and delivery of the
Group’s Strategy for Sustainable Growth and is supported in
this by the Head of Corporate Affairs and Company Secretary,
Rebecca Dunn, a member of the Group Executive Committee.
The Board is supported in the oversight of climate-related risks
and opportunities by Alison Henwood who is the designated
Non-executive Director with oversight of sustainability matters.
The Board Committee structure also includes groups
specifically formed to manage climate-related and wider
sustainability risks and opportunities.
A summary of the roles and responsibilities in relation to climate
change is set out in the diagram on page 67.
During 2023, the Board and the Committees of the Board
received updates at five scheduled meetings on the progress
of the Group’s adaption to climate change through the lenses
of strategy, acquisitions, budget, risk and the assurance of the
metrics utilised by the Group to monitor progress towards
Net Zero. This included a deep-dive review of the Group’s
approach to the identification and mitigation of climate
change risk as part of an ongoing series of deep-dive reviews
of the Group’s Principal Risks.
1. The climate-related financial disclosures made by Spectris Group plc
comply with the requirements of the Companies Act 2006 as amended
by the Companies (Strategic Report) (Climate-related Financial
Disclosure) Regulations 2022.
Governance
At every scheduled meeting, the Executive Risk Committee
reviewed progress against the Group’s action plans to
minimise the Group’s exposure to physical and transition risks.
Through-
out 2023
Management
The Head of Sustainability oversaw the development of
a sustainable product impact taxonomy at Servomex for
integrating sustainability design criteria into R&D.
Strategy
The Group worked with PwC to devise and launch a physical
climate risk dashboard for the Group’s material sites with
ongoing use overseen by the Business Audit and Risk
Committees.
Strategy
The Head of Corporate Affairs and Head of Sustainability
attended several site visits, which included attending kaizens
at key manufacturing sites in the Netherlands to identify
energy-saving opportunities.
Strategy
The Head of Sustainability coordinated global working
groups to assess transition risks and opportunities
focused on logistics, raw materials and product.
Risk management
A new cross-functional ESG Regulatory Steering Group was
formed by the Head of Corporate Affairs to monitor emerging
ESG regulations relevant to the Group.
Governance
The Audit and Risk Committee reviewed the findings of the
second limited assurance engagement performed by Deloitte
over selected environmental data included in the 2022 Annual
Report and Accounts against International Standard on
Assurance Engagements (ISAE) 3000.
Governance
The Executive Committee received a monthly report on the
progress of the Group’s sustainability strategy, including
updates on climate risk and opportunity and the Group’s
progress towards Net Zero. A summary update of progress
was also regularly provided to the Board.
Strategy
The Board received its annual update on the progress of the
Group’s sustainability strategy.
Governance
The Board undertook a deep-dive review of climate change as
a Group Principal Risk, including a review of the quantitative
analysis on physical risks from the interactive physical
climate risk dashboard, and the findings of qualitative and
quantitative analysis on transition risks and opportunities.
Feb
May
Jun
Jul
Oct
Nov
Dec
Governance
The remit of the Nomination and Governance Committee
was updated to include oversight of the Group’s response
to ESG regulation, and the Committee received updates on
regulatory developments in 2023.
Governance
The Board met with sustainability experts from Goldman
Sachs to discuss climate and sustainability trends in the
context of increasing regulatory and investor requirements.
Strategy
The Executive Committee approved capital and operational
expenditure plans for 2024 to progress the Group’s Net Zero
ambition, including installation of solar panels at Malvern,
Royston, and Crowborough.
Governance
The Board undertook a site tour of the Almelo facility, which
included a review of local energy efficiency activities.
Governance
The Nomination and Governance Committee reviewed the
efficacy of the non-executive oversight role undertaken by
Alison Henwood and agreed that the role continued to provide
effective additional support to the Board’s understanding and
oversight of the Group’s approach to sustainability.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Sustainability Report: TCFD continued
Oversight
Board
Responsible for setting the Group’s strategy for mitigating the risks and
delivering on the opportunities presented by climate change.
Audit and Risk Committee
Comprised of independent Non-executive Directors and oversees the
identification, assessment, management, and reporting of risks, including
climate-related risks.
Board
level
Nomination and Governance Committee
Comprised of independent Non-executive Directors and
reviews the governance mechanisms in place to support the
Board’s effective oversight of sustainability risks, including
climate-related risks and emerging regulation.
Oversight
and independent
assurance
Executive
level
Management
level
Remuneration Committee
Comprised of independent Non-executive Directors and
oversees the Group’s Remuneration Policy to ensure that
metrics and targets align with our Strategy and Purpose and
wider stakeholder interests.
Executive Committee
Supports the Chief Executive in devising and executing the
Group’s strategy on climate change and determining the
relevant budgets.
Executive Risk Committee
Reviews effectiveness of existing risk management strategies
and processes in relation to individual Group Principal Risks
and the cumulative risk profile of the Group, and reviews
outputs from the Business Audit and Risk Committees.
Sustainability Steering Group
A sub-committee of the Executive Committee, comprising
leaders from across the Group providing governance,
strategic leadership and execution support to the Group’s
management of climate risk, reporting to the Board and
Executive Committee monthly. It leads identifying
Group-level climate risks by keeping up to date with
external developments, supported by inputs from both
internal and external experts.
Business Audit and Risk Committees
Operating in each Division, formed of a broad set
of internal stakeholders to provide their expertise
and perspectives on business risks, including
climate risks. The Committees identify and report
local risks each quarter which are assessed by a
designated risk owner. The risk owner implements
actions as appropriate and reviews the progress of
these actions each quarter. The outputs of the
Committee are reported to the Executive Risk
Committee.
Ownership and control
67
Planned activity in 2024
Board
• Oversee the development of the Group’s Net Zero Transition
Plan
• Deep-dive reviews on the progress on the Group’s product
sustainability workstreams and sustainable freight
workstreams
Audit and Risk Committee
• Oversee the Group’s reporting of climate risk and the
approach to the inclusion of financial data.
• Oversee the Group’s approach to the implementation of
the Corporate Sustainability Reporting Directive
Nomination and Governance Committee
• Consider the emerging legislative and regulatory
environment regarding climate change and wider
sustainability issues
• Review the optimal approach to ensuring the Board has
sufficient oversight of the Group's sustainability agenda
Remuneration Committee
• Review progress of LTIP measures relating to the Group’s Net
Zero strategy and setting a new target for the 2024 LTIP to
support the Group’s Net Zero ambition
Executive Committee
• Oversee the outcomes identified based on the
transition risk and opportunity workstream, including
the Net Zero Transition Plan
Executive Risk Committee
• Oversee the risks identified in the physical climate risk
dashboard
• Implement risk management initiatives based on the
transition risk and opportunity analysis completed in 2023
Sustainability Steering Group
• Develop the Group’s Net Zero Transition Plan
• Oversee progress in developing product life cycle
assessments (LCAs) and assessing supply chain emissions
• Oversee a feasibility study into the implementation of an
internal carbon price
• Facilitate global progress towards the Group's Net Zero
ambition
Business Audit and Risk Committees
• Review of physical risk mapping of owned sites using the
interactive physical climate risk dashboard
• Identification and management of climate-related risks
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
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Sustainability Report: TCFD continued
Climate Strategy
In 2023, we have applied quantitative and
qualitative methodologies to develop our
understanding of our exposure to physical and
transition risks and opportunities and reassessed
the key strategic implications for the Group.
This year, we have increased the granularity of our climate
scenario analysis within each Division, including site-level
physical risk assessments and Division-level transition risk
and opportunity analysis, with the key findings described in
this disclosure. A summary table of identified physical
and transition risks and opportunities is set out on pages 72
and 73.
Physical risks
In our 2021 TCFD disclosure, we first reported on physical
risks at material sites. This work helped the Group to identify
which physical risks could impact our sites. In 2023, we have
built an interactive physical climate risk dashboard on the
Jupiter Intelligence platform to better understand and
monitor these risks at site level aligned to the latest climate
projections. The dashboard gives site-specific information
on long-term (up to 2050) exposure to acute (wildfires,
precipitation, thunderstorms, flooding), and chronic (extreme
heat, drought) climate risks under three climate change
scenarios, as well as potential financial losses.
The scenarios used are produced by the Intergovernmental
Panel on Climate Change (IPCC) and represent three possible
futures dictated by different levels of global warming,
described in the adjacent table.
These scenarios have been selected because they represent
leading public data sources on future climate change, are
widely used by governments, academia and companies and
are a key recommended public source of scenario data by the
TCFD. The range of scenarios represents a suitable breadth of
possible future outcomes to allow the comparability of effects
of scenarios on physical risk at the site level.
Physical risk scenarios
Scenario
Scenario
alignment
Warming
by 2100
Terminology definitions
SSP 5 – RCP 8.5
IPCC (CMIP-6)
>4°C
SSP 2 – RCP 4.5
IPCC (CMIP-6)
2-3°C
SSP 1 – RCP 2.6
IPCC (CMIP-6)
<2°C
‘Shared socioeconomic pathways’ (SSPs) are scenarios of projected
socioeconomic global changes up to 2100 to derive greenhouse gas
emissions with different climate policies.
‘Representative Concentration Pathways’ (RCP) are GHG
concentration trajectories describing possible climate futures driven
by the volumes of greenhouse gases emitted.
The IPCC’s ‘6th Coupled Model Intercomparison Project’ (CMIP-6) uses
models which incorporate significant scientific advances aligned with
the most recent IPCC report (AR6).
Impacts
We have quantified the inherent financial magnitude of
potential physical impacts associated with flooding, heat,
wind and wildfires driven by damage, disruption, and
heat-related productivity loss.
Flooding: Under a >4°C (SSP5-8.5) scenario average
annualised loss risk per year increases by 16% from 2020 (~£14
million) by 2050 (~£16 million). HBK Suzhou, and MP Zhuhai
are most at risk from flooding impacts due to their proximity
to the coast, and exposure to tropical storms and precipitation
which could lead to flash flooding. For these sites, the
estimated increase in risk of a 1-in-50 year flood event is 10%.
Heat: Several sites are exposed to an increasing number of
days exceeding 35°C, and this is most pronounced for MP
Zhuhai, HBK Suzhou and HBK Porto. In a >4°C scenario
(SSP5-8.5), by 2050, MP Zhuhai, HBK Suzhou and HBK Porto
would see a >30% increase in number of days exceeding 35°C.
In the very unlikely scenario that cooling systems should not
be functioning, the temperature rise could lead to productivity
losses of on average ~£14 million per year by 2050 under a
>4°C scenario.
The scenario analysis has indicated minimal difference in
financial impact between a <2°C (SSP1-2.6) scenario and a
2-3°C (SSP2-4.5) scenario and the greatest change in impact
comes in a >4°C scenario (SSP5-8.5). Across all scenarios, there
is minimal change between the short- and medium-term,
with the greatest effects occurring in the long-term (by 2050).
The potential costs that could be incurred under a >4°C
scenario are also not considered to be material due to our
decentralised operating structure allowing for flexibility in site
configuration over the medium- and long- term preventing
possible long-term financial impacts. Mitigating actions are
also widely understood and already being taken; for example,
in 2023, key sites have focused on installation of solar energy
to reduce exposure to potential energy price shocks and
power outages caused by excess cooling demand with
increasing high heat days; see page 72 for more detail.
The interactive physical climate risk dashboard has now been
adopted by each Business Audit and Risk Committee to
enable continuous monitoring of physical climate change risk,
with the ability to add new sites as needed. In 2024, we will
embed the dashboard into our M&A due diligence process.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 69
Sustainability Report: TCFD continued
Climate hazard exposure at our main manufacturing sites
80
70
60
50
40
30
20
10
e
r
o
c
s
e
g
n
a
h
c
0
5
0
2
–
0
2
0
2
HBK Porto
MP Zhuhai
VI-grade Udine
RLC Willow
Springs
HBK
Suzhou
HBK Darmstadt
Servomex
UK
PMS Boulder
MP
Malvern
HBK Virum
MP Eindhoven
MP Almelo
0
20
40
60
80
100
120
Present day hazard score
Key
Present day hazard score
Measures the absolute potential hazard level according to the selected climate change
scenario (SSP5-8.5) by 2050 (long-term time horizon), based on potential exposure. A combined
score is used for all hazards analysed (flood, wind, heat, precipitation, cold, hail, drought and
wildfire), normalised between 1 and 100.
2020-2050 change score
Measures the level of change in hazard score between 2020 and 2050 (long-term time horizon),
normalised between 1 and 100.
The results of the >4°C scenario (SSP5-8.5)
analysis can be seen in the figure on the
left. The >4ºC scenario is where the greatest
exposure to physical risks arises so this
scenario has been used to assess climate
hazard exposure at the Group's main
manufacturing sites. Each bubble
represents one manufacturing site, and the
size of the bubble indicates the relative
value of the site.
The analysis combines the results of all the
physical risk hazards assessed into two
main scores: a present day hazard score
(x-axis) and a 2020-2050 change score
(y-axis).
The results show that the majority of the
Group’s manufacturing sites included in the
analysis are subject to a relatively low level
of present and future climate-related
exposure e.g. Servomex UK, MP Malvern,
MP Eindhoven, HBK Virum.
Higher present day hazard scores and
2020-2050 change scores are largely driven
by exposure to flooding (HBK Suzhou, MP
Zhuhai) and heat (HBK Suzhou, MP Zhuhai,
HBK Porto). Flooding and heat have
therefore been identified as our greatest
potential risk exposures in terms of physical
risk due to climate change for the Group's
manufacturing sites.
Each bubble represents a manufacturing site. The size
of the bubble indicates total site value, with HBK
Darmstadt representing the site with the highest
overall value.
Relative risk
Low
Medium
High
Very high
Transition risks and opportunities
Following the work completed in 2021, this year we conducted
a more detailed assessment of transition risks and
opportunities incorporating both qualitative and quantitative
methodologies supported by consultancy ERM
(Environmental Resources Management). Risks and
opportunities relating to our products, input materials and
logistics were considered by global working groups across the
Divisions as the areas of greatest potential risk or opportunity.
Our 2022 disclosure recognised the potential for an increase in
operating costs due to government policy and regulation of
carbon, including carbon pricing and tax. This risk has now
been reviewed and understood in further detail in the context
of our products, input materials and logistics. The transition
risk scenarios applied are summarised on page 70.
Deep-dive: Input materials
The analysis identified the risk of increasing input material
costs leading to higher direct costs, driven by carbon pricing
impacts and demand for critical materials. In all scenarios, all
materials assessed were, to some extent, at risk from carbon
pricing. Steel and aluminium are the materials most exposed
to carbon pricing cost impacts, and are already subject to
carbon pricing schemes in some locations.
In all scenarios, demand for materials will also grow with the
Net Zero transition leading to cost impacts, which are
expected to be greatest up until 2030, aligned to the Group’s
medium-term time horizon. Our programme to increase
coverage of suppliers on EcoVadis, and our Net Zero roadmap,
will enable us to mitigate risks associated with climate-related
cost burdens from input materials.
Deep-dive: Logistics
The analysis identified the risk of increasing climate costs
within the logistics network. A financial impact was
considered possible through pass-through costs from
logistics providers associated with their own decarbonisation
costs and increasing carbon pricing burden for their owned
fleets. In all scenarios, a quantitative scenario analysis
demonstrated that the majority of the additional financial
impact is seen by 2030.
This cost profile is largely driven by supply side decarbonisation
costs for logistics increasing significantly out to 2030, with
technology maturity effects decreasing this cost burden post
2030. This could lead to increased logistics costs of around
50% over the next 5 to 6 years if no action is taken. To mitigate
this risk, the Group is already progressing to transition its
logistics network to lower carbon modes of transport, aligned
to our Net Zero roadmap.
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Sustainability Report: TCFD continued
Deep-dive: Products
The analysis identified the opportunity for further
development and repositioning of products within growing
customer markets benefiting from the Net Zero and energy
transition. The period up until 2030 is a key period for growth
for Net Zero-aligned technologies in all scenarios (medium-
term), particularly relating to electrification of vehicles and
battery storage. Other trends with strong alignment to the
Group’s products include carbon capture and hydrogen,
however both will require significant additional external policy
support or technological innovation before being scaled up,
even in the high ambition Net Zero scenario.
In responding to this opportunity, the results reinforce the
focus of the Group’s Strategy for Sustainable Growth and
demonstrate the opportunity for the Group to drive growth
in markets aligned to decarbonisation.
Strategic response
Whilst physical risks are not considered material in our direct
operations, transition risks and opportunities are likely to incur
increasing costs over time, particularly between now and
2030 if not subject to appropriate mitigation and adaption
activity. Our Net Zero roadmap provides our main mitigation
mechanism to transition risks and opportunities and applies
to all business operations; in 2023 we spent £3.2 million on
delivering this ambition. The ESG Regulatory Steering Group
was created to support our response to such risks. In 2023, this
included actions to review EU Carbon Border Adjustment
Mechanism (CBAM) implications. In 2024 the Group will
develop a Net Zero Transition Plan aligned to the Transition
Plan Taskforce (TPT) framework. This will include:
• Considering the implementation of an internal carbon
price, upon completion of a feasibility assessment at
Servomex in 2023
• Continued focus on product and supply chain sustainability
through product life cycle assessments and building
supplier engagement with EcoVadis
• Continuing to reduce reliance on air freight in our supply
chain where possible aligned to our target to reduce
airfreight (long and short haul) by 50% by 2030
Transition risk scenarios
The scenarios used are produced by the International Energy Agency (IEA) and represent three possible future outcomes
relating to the energy transition. These scenarios have been selected because the IEA is highlighted by the TCFD as a leading
source for conducting climate scenario analysis on transition risks and opportunities, with IEA sources also being used widely
by governments, academics and industry. The scenarios selected represent a range of different policy outcomes, all of which
could lead to differing impacts on the Group.
Scenario
Current
policy (Low)
Scenario
alignment
IEA WEO STEPS
(Stated Policies
Scenario)
Warming
by 2100
~3ºC
Medium
ambition
High
ambition
<2ºC
<1.5ºC
IEA WEO APS
(Announced
Pledges
Scenario)
IEA WEO NZE
(Net Zero Energy
Scenario)
NGFS Net Zero
scenario
Scenario descriptions
A scenario which reflects a ‘base case’ level of climate ambition, aligned with
‘current stated and implemented’ policies, such as the Paris Agreement,
whilst also taking into account manufacturing capacity for clean energy
technologies.
A scenario which reflects a ‘medium’ level of climate ambition aligned with
‘current stated and implemented’ policies in addition to pledges without
specific policy action, e.g. UK 2050 Net Zero targets. This scenario assumes
that national energy and climate targets made by governments are met in
full and on time.
A scenario which reflects a ‘high’ level of climate ambition, aligned with the
global economy reaching Net Zero by 2050. This includes policies on top of
those included in the low and medium ambition scenarios. It requires a
transformation of the global energy system, clean energy investment and
innovation, and a rapid shift away from fossil fuels.
A summary of the physical and transition risks and
opportunities identified to have the possibility of being
material, and the strategic response for each, are outlined in
the table on pages 72 and 73. Where we have assessed the
risk or opportunity under different climate scenarios, we have
indicated the scenarios applied. Whilst the scenario analysis
has shown that impacts from these risks and opportunities
could arise across all scenarios and time horizons, the scenario
and time horizons found to have the greatest potential
impacts are identified in the table. We will continue to assess
the benefit of conducting further scenario analysis on other
risks and opportunities.
Spend in 2023 to deliver our Net Zero ambition
£3.2 million
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Case Study
71
Customer:
International banana-growers
Sustainably boosting production
and productivity in agriculture
Malvern Panalytical Smart Return
Agriculture
Smart Return Agriculture is an innovative
solution that combines a Vis-NIR sensor and
a cloud-based platform that uses artificial
intelligence to provide real-time predictive
measurements in the field for leaf nitrogen
levels, soils, disease, and fruit maturity.
Nitrogen Mapping uses the proven Trek
Product, for nitrogen analysis based on assay
analysis in the field.
Challenge
Nitrogen is a vital nutrient for plant growth,
but can also pose challenges for farmers and
the environment. Applying too much
nitrogen can lead to water pollution and
greenhouse gas emissions, while applying too
little can compromise crop yield and quality.
Solution
Smart Return Agriculture allows crop
producers to measure the nitrogen content
in plant leaves, and then generate a map
that indicates the amount and location of
nitrogen fertilizer levels for each field. By
using advanced algorithms and data
analytics, Smart Return provides data to
make customised recommendations for the
optimal amount, timing, and frequency of
nitrogen applications. It also monitors crop
health and performance throughout the
growing season and alert crop producers to
any potential risks enabling producers to
reduce their costs, improve their income,
and minimise their environmental impact.
Our work with one of our banana growers
over the last two years has shown that they
can save at least 20 to 30% on nitrogen
fertilizer by using Smart Return Agriculture for
real-time monitoring which allows them to
make frequent adjustments to their fertilizer
application plans.
The market and potential for Smart Return
Agriculture is vast and promising. Smart
Return Agriculture is currently geared toward
high value crop applications, such as cereals,
oilseeds, pulses, fruits and vegetables, and
can target any crop.
The main drivers for the potential
growth of Smart Return Agriculture are the
increasing demand for high-quality crops,
the rising adoption of precision agriculture
practices, and the growing awareness of
environmental issues.
Benefits
Smart Return Agriculture leverages its unique
features and benefits to capture a significant
share of the high value crop market and
differentiate itself from competitors by
expanding its potential through integration
with other digital platforms and services,
enhancing its value proposition. Smart Return
Agriculture creates a loyal customer base by
providing consistent and reliable results,
enabling long-term relationships with the
crop producers.
Smart Return Agriculture is also enhancing
the sustainability of farming practices, by
minimizing greenhouse gas emissions and
water pollution associated with excessive
nitrogen use, therefore contributing to the
global goals of food security, climate action,
and environmental protection.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 7272
Sustainability Report: TCFD continued
Key
Short-term – 5 years (aligned to the 2023 Viability Statement)
Medium-term – to 2030 (aligned to Group 2030 Net Zero target and Science Based Targets)
Long-term – to 2050 (aligned to the Paris Climate Change Agreement)
* Note on methodology: We have undertaken quantitative and qualitative analysis using climate change scenarios for risks
and opportunities where; (1) data availability is sufficient; and (2) potential magnitude or likelihood deems further analysis
appropriate. For the remaining risks and opportunities, a scenario agnostic methodology has been applied.
Risk or
opportunity
ID
Risk description and
potential financial impact
Methodology*
Scenarios
considered
Main
scenario
Main scenario
time horizon
Strategic response
Physical risk:
Acute
PR1
Flooding at our sites could lead to water
damage to sites or equipment, interruption
to business due to travel disruption, and
capital expenditure required to increase
resilience of sites. Estimated financial
impact from flooding is <1% of operating
profit per year up until 2050.
Quantitative analysis of
estimated financial losses
due to damage and
disruption using financial
input data and scenario
data with support by PwC
and Jupiter Intelligence.
<2ºC SSP1-2.6
2-3ºC SSP2-4.5
>4ºC SSP5-8.5 Medium-term
>4ºC SSP5-8.5
• Local review of flood defence initiatives
• Introduction of interactive physical climate risk dashboard at
sites to enable effective monitoring of physical climate risks
• In 2024, we will include the results of the climate modelling
into our standard M&A processes
Physical risk:
Chronic
PR2
Extreme heat can reduce worker
productivity or impact the performance of
machinery without proper cooling
equipment. Increased capital expenditure
may be necessary to account for increasing
high temperature (>35oC) days. Estimated
financial impact from heat is <1% of operating
profit per year up until 2050.
Quantitative analysis of
estimated financial losses
due to productivity losses,
using data from Jupiter
Intelligence.
<2ºC SSP1-2.6
2-3ºC SSP2-4.5
>4ºC SSP5-8.5 Long-term
>4ºC SSP5-8.5
• Review of current HVAC capacity and building insulation
capabilities
• Installation of onsite-renewables generation to increase
resilience to demand-side shocks on the grid from extreme
heat
• Introduction of interactive physical climate risk dashboard at
sites to enable effective monitoring and management of
physical climate risks
• In 2024, we will include the results of the climate modelling
into our standard M&A processes
Opportunity:
Products and
services
O1
Development of products within growing
‘low carbon’ customer markets such as the
electrification of vehicles and battery
storage, in particular for Spectris Dynamics.
Qualitative analysis based
on product groupings
compared to Net Zero
trends identified in each
climate scenario.
~3ºC IEA STEPS
<2ºC IEA APS
<1.5ºC IEA NZE Medium-term
• Continued focus on Net Zero-aligned markets, in particular
relating to transformation of mobility for Spectris Dynamics
<1.5ºC IEA NZE
Opportunity:
Products and
services
O2
Increasing demand for products that help
customers reduce the emissions and energy
intensity of their own production processes
leading to higher revenues through
demand for lower-emission products
and services.
Scenario agnostic
qualitative assessment of
potential impact and
likelihood.
Scenarios have not yet been
considered for this opportunity
assessment
Medium-term
• Continued rollout of product impact life cycle assessments
(LCA) to embed sustainability criteria into R&D decision-
making, currently underway at Servomex and PMS
• Targets to be Net Zero in scopes 1 and 2 by 2030, and by
scope 3 in 2040, with a commitment to spend £3 million per
annum towards our Net Zero ambition
Transition risk:
Market
TR1
Increasing input material costs driven by
increasing impacts of carbon pricing (e.g. on
materials such as steel and aluminium
linked to CBAM) and increasing demand for
materials directly linked to the Net Zero
transition (e.g. lithium), leading to an
increase in operational expenditure.
Qualitative analysis based
on known purchased input
materials compared to
carbon pricing and
demand impacts in each
climate scenario.
~3ºC IEA STEPS
<2ºC IEA APS
<1.5ºC IEA NZE Medium-term
<1.5ºC IEA NZE
• Use of EcoFact to provide ongoing overview of changes in
global sustainability legislation and regulation
• ESG Regulatory Steering Group will continue to oversee
emerging regulations relating to carbon pricing e.g. the EU’s
Carbon Border Adjustment Mechanism (CBAM)
• Feasibility review of implementing an internal carbon price
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 73
Sustainability Report: TCFD continued
Key
Short-term – 5 years (aligned to the 2023 Viability Statement)
Medium-term – to 2030 (aligned to Group 2030 Net Zero target and Science Based Targets)
Long-term – to 2050 (aligned to the Paris Climate Change Agreement)
* Note on methodology: We have undertaken quantitative and qualitative analysis using climate change scenarios for risks
and opportunities where; (1) data availability is sufficient; and (2) potential magnitude or likelihood deems further analysis
appropriate. For the remaining risks and opportunities, a scenario agnostic methodology has been applied.
Risk or
opportunity
ID
Risk description and
potential financial impact
Methodology*
Scenarios
considered
Main
scenario
Main scenario
time horizon
Strategic response
Transition risk:
Market
TR2
Reduced customer demand for ‘higher
carbon’ products, particularly in a low-
carbon scenario, driven by customer choice
and regulatory pressure.
Scenario agnostic
qualitative assessment of
potential impact and
likelihood.
Scenarios have not yet been
considered for this risk
assessment
Medium-term
• Continued rollout of product impact life cycle assessments
(LCA) to embed sustainability criteria into R&D decision-
making, currently underway at Servomex and PMS
• Targets to reach Net Zero across scopes 1 and 2 by 2030, and
scope 3 by 2040, with a commitment to spend a minimum
of £3 million per annum towards our Net Zero ambition
Transition risk:
Technology
TR3
Required investment to decarbonise direct
operations leading to an increase in capital
expenditure.
Scenario agnostic
qualitative assessment of
potential impact and
likelihood.
Scenarios have not yet been
considered for this risk
assessment
Short-term
• Targets to reach Net Zero across scope 1 and 2 by 2030 and
across scope 3 by 2040
• Net Zero Transition Plan to be developed in 2024 aligned to
the Transition Plan Taskforce (TPT) Framework
Transition risk:
Technology
TR4
Opportunity:
Technology
O3
Required investment to decarbonise
logistics network and transition towards
‘lower carbon’ modes of transport, for
example through the expansion of the
EU-ETS into shipping. Logistics costs for
Spectris could increase by up to 50% in a
1.5oC scenario as logistics partners invest in
decarbonisation and are impacted by
carbon pricing mechanisms. Quantitative
analysis was conducted for Malvern
Panalytical only, so a Group-level financial
impact is not available.
Use of lower emission sources of energy
and switching to renewable energy sources
in operations leading to lower operating
costs, increase energy security, and reduced
exposure to energy taxes. Projected
impact is < 1% operating profit per year
up until 2050.
Quantitative analysis
considering current
logistics costs and carbon
pricing and pass-through
costs in climate scenarios.
~3ºC IEA STEPS
<2ºC IEA APS
<1.5ºC IEA NZE Medium-term
• Continuing our progress to reduce airfreight (long and short
haul) by 50% by 2030, see more on page 76
<1.5ºC IEA NZE
Scenario agnostic
qualitative assessment of
potential impact and
likelihood.
Scenarios have not yet been
considered for this opportunity
assessment
• Installation of renewable electricity generation at Malvern,
Royston and Crowborough in 2023
Short-term
• Introduction of energy saving measures at key sites
• Targets to reach Net Zero across scope 1 and 2 by 2030 and
across scope 3 by 2040
• Net Zero Transition Plan to be developed in 2024 aligned to
the TPT Framework
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 7474
Sustainability Report: TCFD continued
Resilience and Risk Management
The scenario analysis we have undertaken shows
that without any action, climate change will
impact our businesses to a varying degree in
terms of both transition and physical factors. Up
to 2030, our most significant risks are likely to be
transition risks driven by increasing costs over
time. These risks can vary significantly depending
on the nature and speed at which countries act
to align to a Paris Agreement trajectory and the
subsequent development of Net Zero-aligned
markets and technologies.
Resilience
Physical risks, which have limited impacts today, will present a
growing challenge beyond 2030 as warming of the planet
continues, particularly in a >4oC scenario. However, our
decentralised operating structure allows for flexibility in site
configuration over the medium- and long-term, preventing
possible long-term financial impacts. Mitigating actions
already in place also do not make these risks material to our
operations. The addition of the interactive physical climate risk
dashboard empowers our sites to incorporate climate
resilience into their own operational decision-making.
By delivering on our Net Zero roadmap, we can mitigate many
of the transition risks we face due to climate change. Our
roadmap has been incorporated into our financial planning,
which includes our commitment to spend £3 million per
annum towards our Net Zero ambition. This will be further
supported through the development of our Net Zero
Transition Plan in 2024. Our focus on product and supply chain
sustainability in 2023 and into 2024 will help to foster greater
resilience to many of the transition risks identified as well as
helping us to harness relevant opportunities. Read more
about our Net Zero roadmap on page 62.
We are committed to working closely with all our stakeholders
in taking action to combat climate change. Our focus on
innovation and strong relationships with customers
and suppliers will support our swift response to changing
priorities to mitigate the risks present in the transition to a
low carbon economy.
The challenges that we face on climate change are matched
and potentially outpaced by opportunity. We recognise that
the greatest difference we can make to a Net Zero world
is through our products and solutions which support
our customers to make the world cleaner, healthier and
more productive.
Read more about our Strategy to maximise this opportunity
on pages 22 and 23
Risk management
Our approach to identifying, assessing and managing the
risks in our business is set out in the Principal Risks and
uncertainties section on page 48. In 2021, climate change was
designated a Group Principal Risk for the first time as a result
of the scenario analysis undertaken to implement TCFD.
Risks are identified on an ongoing basis throughout the year.
They are assessed and reported on a quarterly basis at a
business level, via individual Business Risk Registers,
maintained by Business Audit and Risk Committees, and
via the Group Principal Risk Register at Group level.
The climate change Group Principal Risk is under the
executive ownership of the Head of Corporate Affairs and
Company Secretary and is underpinned by a series of controls
and actions designed to mitigate risks from climate change
which are aligned to our Net Zero roadmap. As a Group
Principal Risk, key indicators and mitigation strategies relevant
to climate change are reviewed three times a year by the
Executive Risk Committee.
During 2023, the Executive Risk Committee has reviewed
the progress against our Net Zero targets, alongside planned
mitigation activity for the Group’s other Principal Risks to
ensure that our action plan is proportionate to the short-,
medium- and long-term risk posed by climate change.
In 2023, focus has been on building a more detailed and
quantified understanding of the impacts of transition risks,
considering longer time horizons than our typical risk
management processes, up to 2050. Division-level working
groups were established who are now focused on
determining key mitigating actions to addressing the
results of the climate scenario analysis.
To support these efforts, in 2023, the ESG Regulatory Steering
Group was established to aid our response to emerging
regulations and use of the EcoFact database to support early
understanding of the materiality of regulatory and reporting
changes to the Group.
At Division level, each Business Audit and Risk Committee
added relevant physical risks to their risk registers, informed
by the physical climate risk dashboard which uses the latest
climate projections to assess the materiality of physical
climate risks at our sites up to 2050; this provides an accurate
assessment of the risk currently posed by climate change to
the Group. Any changes in risk profile are considered by the
Sustainability Steering Group and material changes will then
be escalated to the Executive Risk Committee.
In 2024, further planned risk management activity includes
developing our Net Zero Transition Plan aligned to the
Transition Plan Taskforce (TPT) framework.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023
75
Sustainability Report: TCFD continued
Metrics and Targets
In 2023, we continued to progress against the
metrics and targets set to support our Net Zero
ambition and aligned to our Strategy for
Sustainable Growth. We will continue to review
the metrics and targets set to ensure their
effectiveness at providing our businesses and
our stakeholders with meaningful indicators of
our progress, as well as addressing material risks
and opportunities identified.
We have set a clear ambition to reach Net Zero across our
own operations (scope 1 and 2) by 2030 and across our
value chain (scope 3) by 2040, set against a 2020 base year.
The 2030 targets accompanying this ambition have been
validated by the Science Based Targets initiative (SBTi) against
a 1.5ºC warming scenario.
Read more about our progress against this
ambition on pages 62 and 63
The Group’s 2023 Remuneration Policy also incorporates
specific targets relating to the reduction in scope 1 and 2
emissions.
Read more about the alignment of our remuneration strategy
with our Net Zero ambition on pages 102 to 123
As part of our commitment to transparency in our progress to
lower our emissions, we disclose our annual emissions against
all relevant categories of scope 1, 2 and 3. We also obtain
limited assurance over scope 1 and 2 and selected categories
of scope 3.
Full disclosure for 2023 and comparative disclosures are set
out on pages 64 and 65
In support of our Net Zero ambition, we have agreed
several ‘input’ metrics which are focusing action across our
businesses. All are measured against a base year of 2020.
A summary of cross-industry metrics from TCFD that are
relevant to us are set out on page 76. The alignment of the
metrics and targets to risks and opportunities identified has
been updated to reflect the climate scenario analysis
completed in 2023.
In 2024, we will be exploring additional metrics and targets
through the development of our Net Zero Transition Plan,
whilst we continue to embed sustainability within our
operations across the Group. We will also consider the
feasibility and effectiveness of the introduction of internal
carbon pricing.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
7676
Sustainability Report: TCFD continued
Metric
Measurement
Definition
Risk/opp ID Our progress
Electricity
Absolute (MWh)
100% renewable electricity across
our operations by 2030.
TR3, O3
Emissions
Intensity-based
(against revenue)
(MWh per £m revenue)
Reducing emissions at our
manufacturing sites through
energy efficiencies by 20% by 2030.
TR3, O3
Waste
Absolute (tonnes)
Zero waste to landfill by 2030.
TR3, O3
Supply chain
Absolute
(tonnes CO2e)
Reduce procurement emissions
through a 60% reduction in input
material-related emissions by 2030.
TR1, TR4
% of supplier spend
100% of suppliers to be rated in
EcoVadis.
Freight
Absolute
(tonnes CO2e)
Reduce airfreight (long and short
haul) by 50% by 2030.
TR4
Capital
deployment
Pounds sterling
Commitment to spend a minimum
of £3 million per annum to deliver
our Net Zero ambition.
TR3, O3
31.9% of the Group is now powered by renewable energy (2022: 22.6%). Our UK operations are
also powered by 100% renewable electricity for the second year running. Our progress in the
reduction of scope 1 and 2 (market-based) emissions against the 2020 base target in our Net
Zero roadmap can be seen on page 62.
We are working to improve the accuracy of waste data in and targeting improvements at
all sites. In 2024, we will be undertaking waste audits at some of our key manufacturing
sites to support the development of our waste strategy. Our metrics on waste are reported
on page 65.
We are engaging with our supply chain with the support of EcoVadis. For Malvern Panalytical,
66.7% of spend is captured (2022: 43.1%), and for HBK, this figure is 24.2% (2022: 0%). For our
2023 scope 3 emissions reporting, we have also begun to incorporate supplier emissions data
from EcoVadis to calculate our Category 1 – Purchased Goods and Services and Category 2 -
Capital Goods emissions. We will be expanding the EcoVadis supplier assessment
programme to Servomex and PMS in 2024.
A concentrated programme by procurement teams has been established to move from air
freight to ocean freight. In 2023, geopolitical challenges affected our ability to move goods by
ocean rather than air, whilst business travel has continued to shift to pre-pandemic levels,
affecting our emissions performance for logistics and business travel.
In 2023, the Group invested in onsite solar generation at HBK in Royston and Marlborough,
at Servomex in Crowborough and at Malvern Panalytical in Malvern. Further projects to
introduce energy efficiency measures on sites are also underway. In total in 2023, £3.2 million
was spent to decarbonise our operations. This is the first year we have reported this figure.
Revenue aligned
to Net Zero
Pounds sterling
Revenues from products or services
that support the transition to a low
carbon economy.
O1, O2, TR2
Scenario analysis completed with Spectris Dynamics in 2023 has identified specific
alignment of our product lines with key Net Zero trends including electrification of vehicles
and battery storage. We are working to align our sales reporting with relevant revenue
streams that support the transition to a low carbon economy considering the EU Taxonomy.
Remuneration
Absolute reduction in
scope 1 and 2
emissions
Align Group remuneration
structures with our Net Zero
ambitions.
TR3, O3
The Group’s Long term Incentive Plan (LTIP), under the 2023 Remuneration Policy includes a
target for the absolute reduction in scope 1 and 2 emissions. Further details are set out on
pages 102 to 123.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Non-financial and sustainability information
statement and index
This statement is made in compliance with the Companies Act 2006 and is intended to provide
an understanding of our development, performance and position on key non-financial matters.
The table below sets out where information relating to non-financial matters can be located.
77
Reporting requirement
Some of our relevant policies and standards Where to find out more information
Anti-bribery and corruption
Code of Business Ethics
Ethics and Values standards
Business model
Environmental matters
Environmental Policy
ISO 14001
Employees
Code of Business Ethics
Health and Safety Policy
OHSAS 18001
Culture, integrity and commitment to our Values
Speak Up and Spectris helpline
Ethical leadership
Principal Risk – Compliance
Our business model
Environmental management
Energy performance
Streamlined Energy and Carbon disclosures
Climate-related Financial Disclosures
KPI – Energy efficiency
Fair employment and diversity
Board diversity
Employee engagement and Workforce Engagement Director
Gender pay
SA 8000 Social Accountability
Health, safety and wellbeing at work
Human rights
Non-financial KPIs
Human Rights Policy
Code of Business Ethics
Managing our Principal Risks
Social matters
KPI – Accident incidence rate
Principal Risks:
– Compliance
– Talent and capabilities
Legal and regulatory compliance
Principal Risk – Compliance
Energy efficiency
Total recordable incident rate
Risk Management
Principal risks and uncertainties
TCFD (Climate-related Financial Disclosures)
Viability Statement
Community involvement
The Strategic Report was approved by the Board on 28 February 2024.
By order of the Board
Rebecca Dunn
Head of Corporate Affairs and Company Secretary
28 February 2024
Page reference
58, 90-91, 99
22-23, 54-58, 90-91
58 and 99
58
48-49
20-21
64-65
64-65
64-65
66-76
27
56-57, 125
56-57, 84, 92, 94
27, 55, 89-91, 93
57 and 123
60
27 and 60
49
50
59
49
27, 53, 64-65
27, 60
46-47
48-50
66-76
51
53, 78-79
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
78
Our mission is to give
equal access to STEM
education globally
The Spectris Foundation was established in
July 2021 with the mission of providing equal
opportunities and global access to quality STEM
education. Our grants champion diversity and
inclusion and we are actively addressing the
gender and socioeconomic gap in science,
technology, engineering and mathematics. In
addition, the Foundation supports charities and
communities that are important to Spectris
employees; and a proportion of funding is set
aside to aid these projects.
In 2023, the Foundation has successfully secured new and
existing funding partnerships. We currently have ten STEM
charitable partners based in the UK, America, India and Ghana
which have a direct impact in their communities and a wider
international reach.
To enhance our impact and our ties with the Spectris Group,
this year, the Foundation recruited 19 global volunteer
ambassadors from Spectris employees to represent the
Foundation to our different businesses and in our different
locations. The involvement of Spectris employees in
Foundation activities is essential to aid and complement
the impact of the charitable grants. Early volunteering
opportunities in 2023 included judging for the Engineering
Education Scheme Wales FIRST Lego League competition
and mentoring students with TechGirlz and Technovation.
We have ambitious plans to build global volunteering
opportunities for employees in 2024.
Rebecca Levy
Foundation Director
Read our impact report online
www.spectrisfoundation.com/our-impact
UN Sustainable Development Goals (SDGs)
We support the UN SDGs and have identified these goals
as goals for the Foundation:
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023
Spectris Foundation continued
Since inception:
In 2023:
Spotlight
The Spectris Foundation has awarded
Donations
£1,365,799
(STEM and employee nominations) with
£1.61m committed to STEM education
£91,000
To employee nominations with 23 different
causes
Funding awarded to employee nominations
STEM grants
7
Awarded in 2023 to existing and new
partners
Volunteering hours
2,560
£204,500
Local, smaller charities nominated by Spectris
employees – each grant has a value no
greater than £5,000
Total grants
69
Across 11 countries (UK, USA, Canada,
Germany, Spain, Portugal, Mexico, Brazil,
China, India, Ghana)
Grants awarded to employee nominations
53
Type of causes supported through employee nominations:
12
1
11
10
9
8
7
6
5
4
3
2
1.
Education
2. Health and wellbeing
3.
Children and young people
4. Alleviating poverty
5. Disability
6. Homelessness
7.
8.
Isolation and loneliness
Sports
9. Theatre
10. Emergency response
11. Climate action
12 Research
8%
32%
11%
2%
13%
7%
4%
9%
2%
2%
4%
6%
Breaking down barriers to
disabled children taking part
in STEM
Dr Chris Bailey, Research Scientist at Servomex, has had
a significant impact on the activities of the Foundation
in 2023, both through his employee-nominated donation
and his work with one of our key STEM grants.
The Foundation was proud to support Chris’s
nomination of Retina UK for a grant of £2,500 to help
support people affected by inherited progressive sight
loss. Chris has received personal support from the
charity for his untreatable eye condition named Retinitis
Pigmentosa. He explains:
“The charity is so friendly, caring and helpful to those in
need and I have recently started volunteering for them!”
Separately, in 2023, the Foundation approved a three-
year funding agreement with a new charitable partner,
The Lightyear foundation. The Foundation is proud to
be supporting Lightyear’s crucial work to break down
barriers to disabled children taking part in STEM. Chris is
further enhancing the Foundation’s funding through his
appointment as a role model. The Lightyear Foundation
provides experience and guidance from real-life role
models who are working in a STEM field. Chris’s profile,
experience and top tips are shared with students living
with similar disabilities.
Chris is a brilliant example of how Spectris employees
are truly enhancing the work of the Foundation.
Find out more about Lightyear Foundation online
www.lightyearfoundation.org
79
£2,500
Grant awarded to Retina UK
to help support people
affected by inherited
progressive sight loss
“Dealing with the
daily challenges of
my disability has
given me a lifetime
of experience of
determination and
problem solving to
succeed when things
are tough. This has
developed over time into
a confidence and a ‘can
do’ attitude.”
Dr Chris Bailey
Research Scientist
Servomex
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
80
Board of Directors
Sharing our expertise
Committee membership key
Audit and Risk
Nomination and Governance
Remuneration
Disclosure
Executive
A
N
R
D
E
Our directors contribute a broad range of personal strengths and experience to guide and oversee the Group’s delivery
of its Strategy for Sustainable Growth.
Chairman of a committee
Retiring
Mark Williamson
Chairman
N
Appointed: May 2017
Nationality: British
Andrew Heath
Chief Executive
E D
Appointed: September 2018
Nationality: British
Derek Harding
Chief Financial Officer
E D
Appointed: March 2019
Nationality: British
Skills and expertise
Mark is a qualified accountant with a strong
financial background combined with
considerable managerial experience. He was
CFO of International Power plc until 2012 and is
experienced in managing relationships with
the investor and financial communities. Until
December 2021, he was senior independent
director of National Grid plc. Mark also served
as chairman of Imperial Brands plc until
January 2020 and as senior independent
non-executive director and chairman of the
audit committee of Alent plc until its sale
in 2015.
Other appointments
None.
Skills and expertise
Andrew joined the Group as Chief Executive in
September 2018, bringing a wide range of
executive and leadership expertise to Spectris,
with proven experience in technology-enabled
businesses and a track record of delivering
shareholder value. He previously served as
CEO of Imagination Technologies Group plc
from 2016 to 2018 and before that was CEO of
Alent plc.
Prior to this, Andrew had a 30-year career with
Rolls-Royce where he held a number of
international and senior management roles,
latterly serving as the president of energy from
2010 to 2015. Andrew has a BSc in engineering
from Imperial College London and an MBA
from Loughborough University.
Other appointments
None.
Skills and expertise
Derek joined the Group as CFO in March 2019
and brings a wide range of financial leadership
and industrial expertise to Spectris. In addition
to his responsibility for Group finance
operations worldwide, he also leads the
operational management of Group Risk;
Group Legal; Investor Relations; Group IT and
the Group’s Capital Allocation process. He
most recently served as group finance director
at Shop Direct. Derek was CFO at Senior plc
from 2013 to 2017 and before that he was at
Wolseley plc for 11 years in a number of
financial leadership roles, most recently as
finance director of Wolseley UK. He previously
held a number of group roles, including group
financial controller, director of group strategy
and investor relations, and head of mergers
and acquisitions. Derek qualified as a
chartered accountant with PwC.
Other appointments
Derek was appointed as a non-executive
director of The Sage Group plc in March 2021.
Cathy Turner
Independent Non-executive
Director and Senior Independent
Director from 26 May 2023
N R
Appointed: September 2019
Nationality: British
Skills and expertise
Cathy is an experienced non-executive
director with significant business leadership
experience plus a deep knowledge of HR and
remuneration matters. Her executive career at
executive committee level at Barclays PLC has
included responsibility for strategy, investor
relations, HR, corporate affairs, legal, internal
audit, brand and marketing.
Other appointments
Cathy is a non-executive director and chair of
the remuneration committee at Rentokil Initial
plc, senior independent director and chair of
the remuneration committee at Lloyds
Banking Group plc, and is a partner at the
senior advisory organisation, Manchester
Square Partners.
Mandy Gradden
Independent Non-executive
Director
A N
Appointed: October 2023
Nationality: British
Skills and expertise
Mandy brings to the Board significant
experience in finance, investor relations,
strategy, digital and software and is currently
CFO of Ascential plc.
Before joining Ascential plc in 2013 as CFO,
Mandy held a variety of financial roles,
including CFO at the FTSE 250 technology
business, Detica Group plc, CFO at Torex, the
private equity-owned retail technology firm,
director of corporate development at Telewest
and group financial controller at Dalgety plc. In
addition to her executive career, Mandy was
also previously a non-executive director and
chair of the audit committee at SDL plc. She
began her career at Price Waterhouse, where
she spent eight years and where she qualified
as a chartered accountant.
Other appointments
In addition to her role as CFO of Ascential plc,
Mandy is also chair of the UK Financial
Conduct Authority’s Listing Authority
Advisory Panel.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Board of Directors continued
Notice of AGM
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81
Committee membership key
Committee membership key
Audit and Risk
Audit and Risk
Nomination and Governance
Nomination and Governance
Remuneration
Remuneration
Disclosure
Disclosure
Executive
Executive
Chairman of a committee
Chairman of a committee
Retiring
Retiring
A
A
N
N
R
R
D
D
E
E
Kjersti Wiklund
Independent Non-executive
Director and Workforce
Engagement Director
A N R
Appointed: January 2017
Nationality: Norwegian
Skills and expertise
Kjersti has held a series of senior global
positions, leading technology enterprises and
managing varied international business
environments effectively. She is an experienced
non-executive director with deep technology
and software experience.
Kjersti has held a variety of executive roles
including; director, global technology
operations at Vodafone; chief operating officer
of VimpelCom Russia; deputy chief executive
officer and chief technology officer of Kyivstar
in Ukraine; executive vice-president and chief
technology officer of Digi Telecommunications
in Malaysia; and executive vice-president and
chief information officer at Telenor in Norway.
Kjersti was previously a non-executive director
of Zegona Communications plc, Babcock
International Group plc (UK), Trainline plc (UK),
Laird plc (UK), Cxense ASA and Fast Search &
Transfer ASA (Norway) and Telescience Inc (USA)
as well as Chair at Saga Robotics (Norway).
Other appointments
Kjersti is a non-executive director at AutoStore
Holdings (Norway), Evelyn Partners (UK), and
Nordea Bank Apb (Finland).
Alison Henwood
Independent
Non-executive Director
A N
Appointed: September 2021
Nationality: British
Skills and expertise
Alison has broad technical experience in key
finance areas including treasury, risk
management, internal control and audit
across regional, divisional and global
functional roles. Until June 2022, Alison was
executive vice president of finance, trading
and supply at Shell plc (‘Shell’), leading finance
for the largest energy-trading business in
the world. She has held a wide variety of
roles across Shell throughout her career,
contributing to finance transformation, culture
change, digitisation and Shell’s move towards
zero carbon. From January 2017 to July 2023,
she also served as a non-executive director
and audit committee chair at the UK
Hydrographic Office, a world-leading centre
for hydrography, specialising in marine
geospatial data to support safe, secure and
thriving oceans.
Other appointments
Alison is a member of the supervisory board at
Umicore which is a global materials
technology and recycling group based in
Belgium. She is also chair of the audit
committee, and a member of the
sustainability committee at Umicore.
Dr Ravi Gopinath
Independent
Non-executive Director
N R
Appointed: June 2021
Nationality: Singaporean
Skills and expertise
Ravi is a highly experienced business leader,
with over 25 years of diverse, global
engineering and software experience, with a
proven track record in setting up, scaling and
transforming high-growth and profitable
technology businesses. Ravi’s last executive
role was with AVEVA plc where he held the
roles of chief product and strategy officer and
chief operating officer in the period from 2018
to 2022. Prior to that he was the executive vice
president of Schneider Electric Software which
was merged with AVEVA in 2018. He previously
held roles at Invensys plc as president,
software and president, Asia Pacific from
2009 to 2014 when Invensys was acquired by
Schneider Electric. Ravi started his career in
India with Tata Consultancy Services and
subsequently was CEO and MD at Geometric
Ltd. He holds a PhD in chemical engineering
from Rensselaer Polytechnic Institute and a
masters in chemical engineering from the
Indian Institute of Technology Bombay.
Other appointments
Ravi is currently a strategic advisor at
Schneider Electric and is a non-executive
director at Thermax Ltd.
Ulf Quellmann
Independent
Non-executive Director
A N R
Appointed: January 2015
Nationality: German
Skills and expertise
Ulf has broad general management
experience and considerable knowledge of
the metals, minerals and mining industry,
having worked in the sector for more than 20
years. He was CEO of Turquoise Hill Resources
Limited (a company listed on the Toronto and
New York Stock Exchanges) until March 2021.
Prior to that, he was vice president, strategic
projects of the copper and diamonds product
group at Rio Tinto plc and, before that, CFO of
the copper and diamonds product group. He
was also group treasurer from 2008 to 2016.
He has held senior positions at Alcan Inc.
including vice president, investor relations and
media relations, and chief pension investment
officer and assistant treasurer, and senior
management positions at General Motors in
both the USA and the UK.
Other appointments
None.
Bill Seeger
Independent Non-executive
Director
A N
Appointed: January 2015
Nationality: American
Retiring:
23 May 2024
Skills and expertise
Bill was Senior Independent Director of
Spectris plc until May 2023 and will be
Chairman of the Audit and Risk Committee
until he steps down following the conclusion
of the 2024 AGM, as part of a planned
succession process. Bill has significant
corporate finance and accounting
experience. Bill was group finance director
of GKN plc and, prior to that, president and
CEO of the propulsion systems and special
products division and CFO in the aerospace
division of GKN. He spent most of his career
at TRW, latterly in senior finance roles,
including as vice-president, financial
planning and analysis, and vice-president,
finance, of TRW Automotive.
Other appointments
Bill is senior independent non-executive
director of Smiths Group plc, lecturer at
UCLA Anderson School of Management
and a director and a member of the
audit and compliance committee at
ICU Medical Inc.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
82
Chairman’s introduction
Continuing
our strategic
progress
“Our direct stakeholder
interactions during the year have
supported considered and
well-rounded discussions at the
Board to promote our long-term
sustainable success.”
Mark Williamson
Chairman
On behalf of the Board, I am pleased to present Spectris’s Corporate
Governance Report for the financial year ended 31 December 2023.
2023 was a very strong year for the Group,
with excellent progress towards meeting our
ambitions set out in our Strategy for
Sustainable Growth. The Board’s 2023
strategy review was held at our Malvern
Panalytical site in Almelo, the Netherlands,
enabling the Directors to see first-hand
how our focused investment in R&D was
supporting the Group to refresh and develop
our product and services aligned to our
Purpose to make the world cleaner, healthier
and more productive. The Board and I were
encouraged to see both the development of
the relationship between PMS and Malvern
Panalytical within the Spectris Scientific
Division and also the clear development of
the digital profile of our existing and new
customer offerings. During the visit we
also met with a key customer to better
understand their relationship with Malvern
Panalytical and their views on our products
and services.
This year, the Board has focused on
supporting and challenging management on
the early delivery of the Group’s strategy and
has spent time with customers, employees,
beneficiaries of the Spectris Foundation, our
Brokers and wider advisers to ensure that we
are reflecting the needs of all our stakeholders
in the Board’s decision-making processes.
I strongly believe in the importance of an
engaged Board to drive the strategy through
a close working relationship with
management. As a Board we are mindful of
modern governance pressures and the risk
that this evolving landscape distracts the
Board from its core oversight role. One way
that we ensure that the Board remains
engaged with the business is through an
active workforce engagement programme,
led by Kjersti Wiklund. Under Kjersti’s
stewardship additional site visits have taken
place to Korea and Denmark, and Alison
Henwood, Ravi Gopinath and Cathy Turner
have joined Kjersti in meeting with
employees from all our businesses, with
different specialisms and at different points in
their careers. These interactions are proving
extremely valuable in supporting the Board’s
wider considerations of the strategic priorities
and performance of the Group. The Board
also welcomes regular interaction with the
senior leadership team and key experts from
across the business and has enjoyed wide-
ranging discussions during 2023 with
representatives from every business and
aligned to every end market.
Our culture
The Group’s Values of Be True, Own It and Aim
High are central to the Group’s organisational
culture. That culture is underpinned by our
Code of Business Ethics, which establishes
our basic standards for all individuals with
whom we engage or collaborate. It serves as a
guide for making excellent decisions and
symbolises our dedication to acting with
integrity in all that we do. The Board closely
observes, and supports, the work of the senior
leadership team to further enhance and
develop the Group’s Values and culture and
further details of this work are set out on
pages 90 and 91. The Board receives a
quarterly update on the development of the
Group’s culture, including key leading and
lagging indicators of progress. In addition,
the Board, through the Nomination and
Governance Committee undertakes an
annual deep-dive review of the Group’s
employee engagement survey results.
Board succession planning
Bill Seeger and Ulf Quellmann will both reach
their nine-year tenure on the Board ahead of
the 2024 Annual General Meeting (2024
AGM). Recognising his length of service and
the selection and appointment of his
successor, Bill Seeger will retire from the
Board at the 2024 AGM. On behalf of the
Board, I would like to sincerely thank Bill for
his advice, challenge and the deployment of
his deep executive and financial experience in
his role as Senior Independent Director and
Chairman of the Audit and Risk Committee.
Recognising Bill’s tenure, Cathy Turner
succeeded him as Senior Independent
Director in May 2023 and it is intended that
Mandy Gradden assume the role of Chairman
of the Audit and Risk Committee following
the conclusion of the 2024 AGM.
The search for a suitable successor to Ulf
Quellmann has been initiated. As part of a
managed Board succession process, and in
recognition of the significant experience that
both Bill and Ulf bring to Board discussions
and the relevant balance of tenure of the
Non-executive directors, with three directors
within their first three years of appointment, it
is intended that Ulf be retained as a Non-
executive director for an additional year to
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
83
Chairman’s introduction continued
ensure continuity while we continue to search
for a suitable replacement with the necessary
strategic and executive leadership experience.
The Board continues to consider Ulf as an
independent director, however, recognising
the spirit of the Code and to avoid any
perception of non-independence, Ulf will
step down from his roles on the Audit and
Risk Committee, the Nomination and
Governance Committee and the Remuneration
Committee at the 2024 AGM and it is
intended that he will retire ahead of the
2025 AGM.
The Board was delighted to welcome Mandy
Gradden to the Board in October 2023.
Mandy has significant financial acumen and
experience as a FTSE 250 CFO and I look
forward to working with Mandy in her new
role as Chairman of the Audit and Risk
Committee, with effect from the conclusion
of the 2024 AGM.
Balancing our leadership pipeline
Building a diverse and inclusive company
is a key priority for the Board. The Board
comprises 40% women in line with the
ambition set out in the Board’s Diversity
Policy. Following Cathy Turner’s appointment
as Senior Independent Director, Spectris is
now fully compliant with the UK Listing Rules
and aligned to the ambition set out in the
FTSE Women Leaders Review.
In 2023, the Board was proud to support
management in setting the ambition that by
2030, 40% of the Group’s senior leadership
population will be women. I am pleased that
the Group has joined peer companies in the
25x25 initiative which will allow us to work
across our industry to shift the gender
balance in our leadership pipeline.
The Board firmly supports the ambitions of
UK Listing Rules and the Parker Review and
meets with the ethnic diversity requirement
at a Board level. We have complied with the
request by the Parker Review to set an
ambition to develop ethnic diversity in our UK
leadership population, while also recognising
the importance of building ethnic diversity in
a global business. More information on the
work undertaken during the year can be
found on pages 18, 56 and 57.
2024 AGM
The 2024 AGM will be held in person at
Melbourne House, 5th Floor, 44-46 Aldwych,
London, WC2B 4LL at 3:00pm on Thursday
23 May 2024.
With the exception of Bill Seeger, all Directors
will be standing for election or re-election at
the 2024 AGM, and we look forward to the
continued support from our shareholders.
The Board and I appreciate our interactions
with shareholders and welcome your
comments on this Corporate Governance
Report and on the 2023 Annual Report and
Accounts. We look forward to meeting our
shareholders at the 2024 AGM and would also
remind all stakeholders that the Board and
I are available throughout the year to answer
questions or engage on topics of interest
to you.
You can contact us via the Company
Secretary and I would also encourage you to
sign up for Spectris news alerts and access to
our webcasts at www.spectris.com
Mark Williamson
Chairman
28 February 2024
Our Purpose
We are harnessing the power of
precision measurement to make
the world cleaner, healthier and
more productive.
Our Commitment
to being a sustainable business
partner, investment proposition
and employer.
Our Values
Be True
is about absolute integrity and how we
focus on doing the right things in the
right way, speaking up when necessary
and showing care and respect for others.
This supports our stakeholders, the
environment and each other.
Own It
provides a focus on teamwork, keeping
our promises and how we build our
brands and businesses.
Aim High
encourages our people to be bold and
positive, striving for greater success. This
helps support a culture of continuous
improvement, keeping an open mind,
and helping others succeed.
Read more about Board discussions and key
stakeholder considerations on page 85
Read more about the Company’s s172(1)
statement on pages 7, 86 and 87
UK Corporate Governance Code
The Code sets out the Company’s approach to
governance. This table shows the pages where
shareholders can evaluate how the Company has
applied the principles of the Code and where key
content can be found in this report.
Chairman’s introduction to the
Corporate Governance Report
82 – 83
Providing oversight of culture
90 – 91
Board engagement with
stakeholders
Section 172 statement
Oversight of strategy
Assessing opportunities
Assessing risks and viability
Measurement of strategy
Division of responsibilities
Board Committees
Board attendance
85 – 87, 89
7, 86 – 87
85
85
85, 98 – 100
85 – 87
84
84
Composition, succession and evaluation
Board biographies
Board evaluation
Nomination and Governance
Committee Report
Audit, risk and internal control
80 – 81
88
92 – 94
Audit and Risk Committee Report
95 – 101
Principal Risks and risk appetite
46 – 50
98 – 100
Monitoring of emerging risks
46, 90 – 100
Remuneration
Letter from the Chairman of the
Remuneration Committee
102 – 103
Overview of Remuneration Policy
105
2023 Implementation report
102 – 123
UK Corporate Governance Code
Statement of compliance
As a UK listed company, Spectris plc is expected
to comply or explain any non-compliance with
the Code, published by the UK Financial
Reporting Council and available on its website,
www.frc.org.uk. The Board considers that the
Company complied fully with the provisions
and principles as set out in the Code throughout
the year ended 31 December 2023.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 84
Governance at a glance
Board structure
Key highlights
The Board
Responsible for defining the Company’s purpose, setting a strategy to deliver it,
and overseeing values and behaviours that shape the Group’s culture and the way
it conducts its business. The Board has several matters reserved specifically for its consideration and
delegates other responsibilities to the Board and Management Committees as appropriate
January
The Board approved the 2023 budget,
reviewed early trading results for 2022 and
agreed supporting remuneration matters.
2023
February
The Board approved the Group’s full-year
results and undertook a deep-dive review
of the Group’s Health and Safety
performance and supporting activity.
Audit and Risk
Responsible for overseeing the
financial reporting process,
significant accounting
judgements and estimates, the
Group’s ethics and compliance
programme, financial and
compliance controls and risk
management
Board Committees
Nomination and
Governance
Responsible for advising on talent
management and succession
for the Board, Executive and
senior management and
oversight of the Board’s
governance structures
Remuneration
Responsible for recommending
the policy for the remuneration
of the Chairman, the Executive
Directors and the Executive
Committee members, in the
context of considering the
pay and conditions of the
wider workforce
Management Committees
Executive
Responsible for the day-to-day management of the
Group’s operations with support from specific
forums on SBS, Health and Safety, Risk
Management, Export Controls and Sustainability
Disclosure
Responsible for the identification and disclosure of
inside information and for ensuring that
announcements comply with applicable laws
and regulations
2023 Board and Committee attendance
Board
(scheduled)1
Audit and Risk
Committee
Nomination and
Governance
Committee
Remuneration
Committee
Ravi Gopinath
Mandy Gradden3
Derek Harding
Andrew Heath
Alison Henwood
Ulf Quellmann
Bill Seeger
Cathy Turner
Kjersti Wiklund
Mark Williamson
7/82
2/2
8/8
8/8
8/8
8/8
8/8
8/8
8/8
8/8
N/A
2/2
N/A
N/A
4/4
4/4
4/4
N/A
4/4
N/A
3/3
1/1
N/A
N/A
3/3
3/3
3/3
3/3
3/3
3/3
5/5
N/A
N/A
N/A
N/A
5/5
N/A
5/5
5/5
N/A
AGM
1/1
N/A
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
March
The Board received a detailed update
on analyst and investor feedback
following the announcement of the
2022 full-year results.
May
The Board met with shareholders at
the AGM.
August
Kjersti Wiklund and Alison Henwood
visited the HBK facility in Virum,
Denmark as part of the Board’s
workforce engagement programme.
October
The Board undertook its annual deep-
dive review of the Group’s strategy.
October
The Board met with representatives
from Ketjen, a key customer of
Malvern Panalytical at its site in
the Netherlands.
April
Kjersti Wiklund and Ravi Gopinath
undertook a three-day visit to
the Group’s operations in Korea
as part of the Board’s workforce
engagement agenda.
July
The Board held a deep-dive discussion
with Goldman Sachs on investor views
on sustainability.
September
The Board oversaw the completion of the
acquisition of the MicroStrain business.
October
The Board visited the Malvern Panalytical
site in Almelo, the Netherlands, met
with employees, a customer, and
undertook a daily Gemba Walk.
December
The Board approved the divestment of
Red Lion and undertook a detailed review
of the Group’s capital allocation strategy
supported by the Group’s Brokers.
January
The Board reviewed the early trading
results for 2023 and agreed supporting
remuneration matters.
2024
February
The Board approved the Group’s
full-year results and supporting
release to the market.
Our diversity goals
We are committed to externally set goals on diversity. Beyond this, we recognise the
importance of all forms of diversity and are striving for further progress.
FTSE Women Leaders Review (%)
Parker Review
1. There were no ad hoc Board meetings held during 2023.
2. Due to the timing of the scheduled Board meeting in October 2023 to approve the Group’s Q3 results, Ravi
Gopinath was unable to attend. Dr Gopinath received papers and provided his detailed comments to the
Chairman ahead of the meeting and feedback was provided on the discussion held at the meeting.
3. Mandy Gradden joined the Board on 16 October 2023.
Target
Spectris
Target: 40% women by 2025
40
40
Target
Spectris
1
1
Target: One Board member from an ethnic minority
background by 2024
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 85
Operations and risk
Stakeholders considered
Finance
Stakeholders considered
Board and Committees
Responsible oversight
and management
The Board and a series of its committees oversee and manage the
governance of the Group. These bodies provide a mechanism to approve,
review, challenge and monitor the strategies and policies under which the
Group operates. The structure and responsibilities of the Board and these
management committees, and a summary of their responsibilities, are
illustrated on this page.
Matters Reserved to the Board, Committee Terms of Reference and Role Profiles are available at
www.spectris.com
2023 activities
• Received presentations from members of the
leadership team on health and safety, cyber
security, climate risk and the ethics and
compliance programme.
• Carried out deep-dive reviews of a Principal Risk
at each meeting to ensure continued alignment
with the strategy, including geopolitical risks,
compliance and climate change.
• Reviewed the Group’s takeover defence approach
as part of a planned annual review.
• Carried out in-depth sessions with each Division
to discuss strategic direction and risks and
opportunities. Reviewed the Group’s operations at
the Almelo site and joined the daily Gemba Walk
to understand more about the Group’s daily
activities under the SBS.
Strategy
Stakeholders considered
M&A
Stakeholders considered
Leadership and people
Stakeholders considered
2023 activities
• Provided oversight of the early progress and
2023 activities
• Received updates on the progress made
delivery of the Group’s Strategy for Sustainable
Growth and the progress towards the financial
and non-financial targets that accompanied
the strategy.
• Received updates from the Group’s Brokers and
economists on the developing geopolitical and
economic environment in which the Group was
delivering against its strategy.
• Reviewed progress against the 2022–27 Financial
with the divestment strategy and ensured that
the Group’s stakeholders were considered during
the process.
• Considered and assessed each of the M&A
activities where Board approval was required,
including the divestments of Concept Life
Sciences and Red Lion, the acquisitions of
MicroStrain and EMS, and investment in a
minority interest in LumaCyte.
2023 activities
• Undertook reviews of the people strategies within
each Division and at a Group level.
• Continued to focus on employee wellbeing,
reviewing the Group’s approach to mental health
and health and safety.
• Reviewed the results of the Group’s annual
employee engagement surveys and key trends
underpinning the overall increase in employee
engagement.
• Further developed and expanded the role of the
2023 activities
• Considered and approved the 2024 budget
following review of progress against the
2023 budget.
• Approved the Annual Report, interim results and
full- and half-year results presentations.
• Approved the Group’s going concern and viability
statements.
• Considered and assessed the efficacy of the
Group’s capital allocation model, including
approving the completion of the remaining
£110 million of the £300 million share buyback in
February and a further £150 million share buyback
in December, together with planned M&A
expenditure.
Governance and ethics
Stakeholders considered
2023 activities
• Monitored progress against the evaluation actions
from the 2022 externally led Board evaluation.
• Received updates on the Ethics and Compliance
programme, and the impact of the Values Booster
programme in Asia.
• Approved the Committee Terms of Reference,
the Matters Reserved to the Board and Board
Role Profiles.
• Received updates on ongoing litigation matters,
corporate governance and key legal and
regulatory topics.
Plan.
• Received updates on the ongoing M&A activities
Workforce Engagement Director.
• Approved the Group’s new Supplier Code
• Carried out detailed strategy reviews of the
Divisions.
• Oversaw deep-dive reviews into the Group’s
digital strategy.
• Received a detailed update on the progression of
the Group’s sustainability strategy.
and the Group’s pipeline of opportunities.
• Reviewed key integration metrics of the Group’s
acquisitions since 2020.
• Undertook a deep-dive review of the acquisition
of Dytran Instruments with the Divisional
management team, reviewing both financial and
non-financial factors to determine the success of
the acquisition and key lessons learned.
• Approved the development of the Board’s
Diversity Policy and the Group’s ambition that
by 2023, 40% of the Group’s senior leaders would
be women.
• Approved the Group’s approach to compliance
with the Parker Review and the setting of a target
for building ethnic diversity in the senior
management population in the UK.
• Reviewed succession planning for the Board,
the Executive and the senior management
population.
of Conduct.
Our key stakeholders
People
Customers
Community
Shareholders
Suppliers and partners
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
86
Section 172
Supporting our
section 172(1) statement
Understanding our stakeholders
and what matters most to them
The Board has identified the key
stakeholders of Spectris and the
areas they are interested in about
the Spectris Group:
People
Culture, values, diversity and inclusion,
operating in an open and ethical
environment, health and safety,
progression and personal development
opportunities, remuneration and
workforce engagement.
Community
Economic and operational impact of
Group businesses on local communities,
environmental impact of operations (direct
and indirect), demonstrate clear and
sustainable policies which support our
Values and how these are measured.
Customers
Operational strength, ability to meet
customer needs, remaining competitive
with a strong differentiated value
proposition, high-quality instruments and
technical expertise and advice, ensuring
service levels meet expectations and
ensuring that our business practices and
supply chain accord with their values.
Shareholders
Financial performance of the Group,
capital distributions, our Strategy for
Profitable Growth, long-term viability and
ensuring that the Group is a sustainable
investment proposition.
Suppliers and partners
Ensuring that our supply chain reflects the
Group’s Values, potential supply chain
disruption, competitiveness, financial
performance, research and development
investment.
Building on our understanding
Bringing the voice of stakeholders into the
Boardroom through:
• employee interactions during site visits;
• deep-dive sessions with the Divisions and
their leadership teams;
• meetings with customers;
• regular reviews of shareholder interactions,
including direct feedback from meetings
held with shareholders by the Chairman,
Executive Directors , Head of Investor
Relations and Head of Corporate Affairs
and feedback from the Group’s brokers;
• regular and detailed feedback from the
engagement activities carried out by the
Workforce Engagement Director; and
• contextual feedback from key leaders on
the Group’s employee engagement survey
results.
Considering stakeholders in our meetings
and principal decisions
Divestment of Red Lion Controls
The Board carefully considers the impacts of
the divestments on employees, customers
and shareholders. In December 2023, the
Board approved the divestment of Red Lion
with 403 employees. As part of their
considerations, the Board reviewed the
potential buyers’ intentions for employees,
how a sale might impact the service for
customers as well as the impact on
shareholder value following the divestment
for Spectris investors. The cultural fit
of the buyers involved in the process was
also considered. These topics were a key
focus during the process stage and
management provided regular updates to
the Board, and the Board provided ongoing
challenge and support to management.
Following review, it was concluded that the
sale to HMS Networks was in the best
interests of the Group’s stakeholders as a
whole, with a particular benefit to the future
prospects for the Red Lion business which
was in the interests of Red Lion’s employees
and customers. In addition, the divestment
improved the financial profile of the Group as
a whole for the benefit of the wider Group’s
employees, shareholders and customers.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Section 172 continued
Acquisition of MicroStrain, EMS , XRD
product line from Freiberg Instruments
and the investment in LumaCyte
In considering the acquisition of MicroStrain
in 2023, the Board gave particular focus to the
interests of the Group’s shareholders and
customers. This included discussing and
ensuring that the acquisition was aligned
with the Group’s strategy to acquire
complementary businesses which
strengthen the Group’s offering and expand
the Group’s footprint to build long-term value
for shareholders. Having considered the
projected financials, growth prospects,
cultural alignment and employee retention
plan, the Board concluded the acquisition
was in the best interest of the Group’s
stakeholders as a whole.
The Board also received regular updates from
Management on:
• EMS, which enables PMS to be an exclusive
distributor of PMS products in the UK;
• XRD product line from Freiberg
Instruments, which broadens Spectris
Scientific’s semiconductor metrology
offering; and
Customer engagement
The Board met directly with two key
customers in 2023. In May 2023, the Board
met with the chief technology officer of
Schenck Process, who provided an overview
of their long-standing and collaborative
partnership with Spectris Dynamics. The
briefing outlined the synergies between
Spectris Dynamics and Schenck Process and
the alignment value in both businesses
sharing a similar purpose to deliver premium
services and quality products whilst making
the world cleaner, healthier and more
productive. The Board found the perspective
very helpful to its ongoing review of the
operational performance of Spectris Dynamics.
In October, the Board visited Ketjen, a
customer of Malvern Panalytical in
Amsterdam, the Netherlands. During the visit,
Board members saw the strong reliance the
customer places on the accuracy and
reliability of our products and the support our
teams provides to them. The visit provided
invaluable context for strategic decisions that
supported the approval of the Group’s
Strategy for Sustainable Growth.
Given the strategic synergies, enhanced
customer offering and projected financial
and market growth expected, it was agreed
that the acquisitions would benefit a broad
range of stakeholders.
Supporting employees with the cost
of living
Inflationary pressures and the increased cost
of living continued to impact employees in
many locations across the Group in 2023. The
Remuneration Committee has supported
management’s approach to supporting
employees and reviewed key measures
introduced by management to mitigate the
impact for key employee groups. Further
details are set out in the Remuneration
Report on page 102 to 123.
Shareholder return
The Board understands the importance of its
investment case to shareholders, more details
of which are set out on pages 22 and 23.
Following the divestment of Red Lion, as well
as a strong performance at the end of 2023,
the Board considered and approved a
£150 million share buyback programme.
The Board also approved the final dividend
in February 2024.
The Board recognises the importance of
capital returns to our shareholders and was
pleased to be in a position to be able to make
this decision. The Board also considered that
the share buyback would not have an adverse
impact on any of its other stakeholders,
including its ability to invest in organic and
inorganic growth, and that it had sufficient
cash reserves available for the share buyback
programme.
• LumaCyte, through a minority investment,
which coupled with Creoptix amplifies
Spectris Scientific’s pharmaceutical offering.
Further details of how the Group as a whole
has engaged with its customers can be found
in the case studies within the Strategic Report.
Employees
87
2023 Spectris Dynamics Capital
Markets Day
A focused investor day was held at VI-grade in
Udine, Italy, in June 2023, to provide greater
insight into the outlook and prospects for the
Spectris Dynamics Division. The presentations
highlighted the unique breadth of Dynamics’
offering; its plans to drive continued organic
growth from strong positions in attractive,
high-growth markets; and its focus on
delivering sustainable profitable growth and
further margin expansion.
The Board recognises the importance of
engagement opportunities for investors and
future investors to gain a better understanding
of the Group and the strength of its
investment case. These engagement
activities are in addition to the ad hoc
shareholder meetings carried out by the
Chairman and Executive Management, as
well as the AGM.
Further information on the ways in which section 172 has become embedded in how the
Company operates can be found throughout the report, some of which are indicated below:
s172 factor
Page reference
Relevant section of the report
The long-term
pages 2 – 3
pages 22 – 23
pages 20 – 21
pages 54 – 58
page 77
pages 89
pages 82 – 83
pages 90 – 91
• Our Purpose
• Strategy for Sustainable Growth
• Business model
• Sustainability report
• Non-financial reporting table
• Workforce engagement
• Chairman’s introduction to governance
• Oversight of the Group’s culture
Business relationships –
suppliers and
customers
page 16
pages 19, 31 – 39, 45 and 71
page 51
• Chief Executive’s review
• Case studies
• Monitoring supplier performance
Community and
environment
High standards of
business conduct
Shareholders
page 18
pages 78 – 79
pages 62 – 63
pages 66 – 76
page 58
pages 90 – 91
page 99
pages 66 – 76
pages 20 – 21
pages 82 – 83
pages 80 – 81
• Chief Executive’s review
• The Spectris Foundation
• Net Zero
• TCFD report
• Sustainability report
• Monitoring the Group’s Culture
• Audit and Risk Committee Report – Ethics
and Compliance
• TCFD report
• Our Business Model
• Chairman’s introduction to governance
• Board of Directors
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 88
Board evaluation and effectiveness
Informed
decision-making
Access to
the business
Training and
development
The Chairman is supported by the Head of
Corporate Affairs and Company Secretary in
ensuring the dissemination of accurate, timely
and clear information to the Board, allowing it
to function effectively and efficiently. The Head
of Corporate Affairs and Company Secretary
is responsible for ensuring compliance with
appropriate laws and regulations and is available
to support all of the Directors. Directors may
solicit independent, professional advice at
the Company’s expense where specific expertise
may be required to effectively discharge
their duties.
The Board undertakes a deep-dive review with
the leadership of each Division at least annually.
Additionally, each year the Board meets on-site
at one Division. Board visits include a tour of the
relevant facility, overviews of key products with
their developers, a deep-dive review of the
business with the wider leadership team and
the opportunity to meet informally with
employees. During 2023, the Board visited
Malvern Panalytical in Almelo, the Netherlands.
Further details are set out on page 89.
New Directors receive a formal, tailored and
comprehensive induction programme on joining
the Board, and further training and development
needs are reviewed by the Chairman and agreed
at least annually. The Board receives detailed
technical updates in relation to corporate
governance and other legal and regulatory
topics from internal and external specialists.
An external speaker programme brings thought
leadership to Board discussions on a variety
of emerging themes and topics. In 2023
these topics included a discussion on the
macroeconomic environment relevant to
the Group’s key markets, led by Barclays, a
discussion with Goldman Sachs on investor
views on sustainability and discussions with key
customers to better understand their
perspective on global trends.
The effectiveness of the Board is monitored through annual evaluation
Board evaluation
As required by the Code, the Board undertakes an annual evaluation of its effectiveness.
2022 Board evaluation process and outcomes
The 2022 Board evaluation was externally
facilitated by Lisa Thomas from Independent
Board Evaluation and the process took place
between December 2022 and February 2023.
Neither Lisa Thomas nor Independent Board
Evaluation have any other connection with the
Company or individual Directors.
The 2022 evaluation built on the outcomes of
the 2021 evaluation and considered the Board’s
composition, diversity and effectiveness. Each
Board Committee was also reviewed as part of
the external evaluation process and a review of
the Chairman’s performance was led by the
Senior Independent Director. Initial feedback
and recommendations from the external
evaluation were presented to the Board for
discussion in February 2023 and were subject to
active action planning and review by the Board
during 2023.
The Board reviewed the findings of the 2022
evaluation at key junctures during 2023 and
built actions arising from the evaluation process
into the annual Board planner to ensure that
progress was made. Key activities undertaken
in response to the outcomes of the Board
evaluation process included:
2023 Board evaluation process
The 2023 evaluation process commenced in
October 2023 and has been internally
conducted and overseen by the Head of
Corporate Affairs and Company Secretary. The
evaluation involved the Board and its
Committees completing a comprehensive
review of their effectiveness, incorporating any
key themes identified during the 2022
evaluation process. In addition, the Chairman
has met separately with each Non-executive
Director to assess their performance.
• Increasing the number of Audit and Risk
Committee meetings to four per year,
supporting an increased focus on risk and
internal audit.
• Extending the remit of the Nomination and
Governance Committee to include oversight
of the Board’s governance structures,
including the structures supporting oversight
of the Group’s sustainability agenda.
• Returning to impactful in-person
engagement which included face-to-face
meetings for all major Board and Committee
meetings, in-person site visits and workforce
engagement sessions attended by the
Workforce Engagement Director with a
rotation of Non-executive Directors.
• Reviewing peer group best practice for Board
inductions which has helped shape the
induction process for Mandy Gradden.
• Extending the length of Board meetings and
introducing more informal discussion time
and external thought leadership.
• Enabling the ongoing oversight of the
development of the Group’s healthy high-
performance culture.
The outcomes and responses were collated and
discussed by the Board at its meetings in
February 2024 and it was concluded that the
Board and its Committees continue to operate
effectively. The Senior Independent Director led
the Non-executive Directors in their annual
review of the performance of the Chairman.
Details of the outcome of the evaluation and the
progress of actions agreed will be reported in
the 2024 Annual Report and Accounts.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Workforce engagement
Workforce
engagement activities
Korea site visits
The workforce engagement programme supports the Board having
meaningful and regular dialogue with the workforce to capture key
insights and to bring the employee voice to the boardroom.
The workforce engagement activities are
supported by the Group HR Director and in
2023 included visits to the Group’s operations
in Spectris Korea, the HBK facility in Virum,
Denmark and the Malvern Panalytical facility
at Almelo, the Netherlands.
Kjersti has met regularly with the Group
HR Director and the Division HR Directors
to review the development of the Group’s
employee proposition. The feedback from
these discussions has supported wider Board
insight into the employee experience and
provided additional context for the outcomes
of the employee engagement survey.
During 2024, it is planned that engagement
activities will continue in a similar structure,
focused on sites and countries not visited in
2023. Kjersti will continue to provide regular
feedback to the Nomination and Governance
Committee and the Board to support their
active consideration of the experience of
employees as part of their wider focus on
business performance.
HBK Virum site visit
Almelo site visit
Kjersti Wiklund
was appointed as the
Board’s first Workforce
Engagement Director
in 2019.
Kjersti plays an integral role in supporting
the links between the workforce and the
Board. The Board recognises the importance
of creating and maintaining clear lines of
communication with the workforce. The role
of the Workforce Engagement Director is
pivotal to maintaining these direct links with
the workforce. The open forums led by
Kjersti provide employees with the
opportunity to express their opinions in
an open environment without direct
management present.
The workforce engagement schedule for
2023 was extended to include the attendance
of a rotation of other Non-executive Directors
to provide additional perspectives on the
discussions. This approach has added further
content and depth to Board discussions. For
the second year, four themes were used to
structure the sessions with employees:
• engagement;
leadership;
•
• sustainability; and
• diversity and inclusion.
89
In April 2023, Kjersti and Ravi Gopinath visited
the Group’s operations in Korea for three days.
Their visit included meetings with senior
management for Spectris Asia and the
leadership team based in Korea. They also met
with employee groups from PMS, Servomex
and Spectris without management present.
In addition, Kjersti and Ravi received a
presentation from the Spectris Asia HR team
on the Values Booster programme and an
overview of employee engagement activity for
Spectris Asia.
In September 2023, Kjersti and Alison
Henwood held workforce engagement
discussions with a selected group of
employees from HBK based in Virum,
Denmark. The sessions focused on employee
feedback on the early impact of the Legato
project, the strategic direction and the
leadership of the business. Employees
appreciated being given the opportunity to
express their opinions on current priorities
within the business and Kjersti and Alison
were impressed by the engagement and
talent within the employee groups.
As part of the full Board site visit to Almelo in
October 2023, Kjersti and Cathy Turner met
privately with a group of employees without
management present. The employee group
comprised of a diverse mix of experience, tenure
and gender diversity. The open discussion
focused on the employee experience,
engagement, diversity and remuneration at
Almelo, and provided Kjersti and Cathy with a
holistic overview of the employee experience at
that site and further context for the summary
engagement results reviewed by the
Nomination and Governance Committee.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Purpose and Culture highlights
Employee engagement
(GrandMean)
Percentage of employees
taking part in the survey
3.92
Employee engagement (GrandMean)
3
4
2023
2022
2021
3.92
3.86
3.72
80%
5
0
20
40
60
80
100
2023
2022
2021
80%
78%
64%
Our Values inspire a culture that enables a bold,
high-performing business made great by our people,
delivering value beyond measure.
90
Monitoring the Group’s cultu
Monitoring the Group’s culture
Our
Purpose and
our culture
The Board is committed to the continued development of a healthy high-
performance culture and believes that this is pivotal to the future success of
the Group.
Our Purpose is to harness the power of
precision measurement to make the world
cleaner, healthier and more productive,
delivering value beyond measure for all our
stakeholders. We are committed to creating
a sustainable business proposition for all our
stakeholders, ensuring that we prioritise a
culture of long-term growth set on solid
foundations. The Code of Business Ethics and
the Spectris Values – Be True, Own It and Aim
High – provide the framework within which
we operate.
The Spectris Values focus on encouraging the
right behaviours to support our Purpose. For
our employees this means creating a great
place to work, where their safety and
wellbeing is a priority and where they feel that
they belong, are seen and can develop and
grow. For our suppliers and customers this
also means shared ethical business practices
and a joint commitment to making the world
cleaner, healthier and more productive.
Our Code of Business Ethics underpins
our approach. We recognise that continually
nurturing and developing the ethical
culture of our organisation and demanding
the same high standards from our partners
and suppliers, helps to build trust with all
our stakeholders, and supports our business
model and the successful execution
of our strategy to realise long-term,
sustainable growth.
Read more about Our Code of Business Ethics
on page 58
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Monitoring the Group’s culture continued
Culture and the Board
In 2023, to assess the development of the
Group’s culture, we undertook our third
Group-wide Gallup employee engagement
survey. The Board was pleased to see that
participation continued on an upward trend,
with 80% of employees participating in the
survey (2022: 78%, 2021: 64%). The Board was
encouraged by the 3.92 engagement score,
which was an increase from the 3.86 in 2022
and 3.72 in 2021.
As in previous years, we included four
questions on ethics, diversity, equity, inclusion
and belonging to better understand
employee sentiment on our Values and
culture. Overall, the Board was pleased to see
that the results globally showed an
encouraging improvement in all metrics
compared with the previous two years.
Read more about the results of the survey
on pages 54 and 55
In 2023, the Board discussed and monitored
culture through a number of mechanisms. In
May 2023, the Group HR Director, presented
to the Board a culture dashboard, created to
bring together the key metrics considered to
provide a consistent and measurable
overview of the development of the Group’s
culture. This enables the Board to review the
Group’s progress in achieving a Values-based,
healthy, high performing culture. The Board
will review the dashboard in detail annually,
with quarterly updates also being received by
the Nomination and Governance Committee
to monitor the Group’s progress.
The Board, through the Nomination and
Governance Committee also undertook an
annual deep-dive review of employee
engagement. This review, presented by the
Group HR Director, summarised the latest
Gallup research on external engagement
trends, the internal engagement trends at
Spectris between 2021 and 2023 and outlined
future engagement plans.
As part of the Board annual strategy
reviews, the Group HR Director provided
an update on the progress made against the
HR strategy, with particular focus on culture
and engagement, talent and leadership,
and organisational effectiveness. The
Board also received an update on the key
developments in the external landscape
and internal developments since the 2022
strategy reviews.
Detailed discussions were also held
throughout the year on diversity, inclusion
and belonging, and the Board approved the
setting of a public ambition that by 2030, 40%
of the Group’s senior leadership community
would be women. The Group has also joined
peer companies in the 25x25 initiative which
will allow us to work across our industry to
shift the gender balance in our leadership
pipeline. The Board also broadened its
understanding of the ethnic diversity present
within senior leadership and the processes in
place to request further data from employees.
In line with the Parker Review, the Board
approved an ambition to develop ethnic
diversity in our UK leadership population,
while also recognising the importance of
building ethnic diversity in a global business.
More information on the Group’s ambition
can be found on pages 56 to 57.
The Board also discussed the progress made
against the Group’s inclusion and belonging
roadmap which was launched in October
2022. The roadmap focuses on policy, action
and communication to openly develop the
Group’s commitment to fostering a diverse
and inclusive workforce with the aim of
ensuring that everyone within the Group or
considering a career within the Group feels
that they belong. Particular highlights during
the year have included progressing the
development of employee resource groups
within the Divisions and developing global
policies on gender-neutral parental and
caregiver leave.
Read more about the Group Inclusion
Framework and Inclusion and Belonging
on pages 56 and 57
During the year, Kjersti Wiklund, as the
Board’s Workforce Engagement Director,
also held several engagement sessions
with employees. These sessions were also
accompanied by other Non-executive
Directors. In April, Ravi Gopinath joined Kjersti
on a three-day engagement deep-dive visit
to Korea, during which they met with senior
management and groups of employees from
each operating business. In September,
Alison Henwood joined Kjersti at the HBK
facility in Virum where they met with groups
of employees based at the site. During the
planned Board visit to the Malvern Panalytical
facility in Almelo, Cathy Turner joined Kjersti
for employee engagement meetings.
91
As in 2022, four key themes were used
to structure the sessions: engagement;
leadership; sustainability, and diversity
and inclusion. Throughout each of the
engagement sessions employees remained
highly engaged and actively contributed
to discussions. Feedback from the visits
was reported back to the Nomination
and Governance Committee, and
feedback received has informed the
Board’s decision-making.
Read more about these visits
on page 89
There are formal and informal channels for
all employees to raise concerns, with any
significant concerns and insights being
shared with the Audit and Risk Committee
through the Group Ethics and Compliance
Programme. Regular updates on the Speak
Up programme and reporting from the
confidential Spectris helpline are provided to
the Audit and Risk Committee, alongside a
formal annual review, including consideration
of the remediation actions taken for reports
received through the Helpline.
The Audit and Risk Committee also
receives an update on the completion rates
of the ethics and compliance programme,
which includes the Code of Business Ethics
refresher training, completed by the Board
and employees.
Key customers have also continued to be
invited to Board meetings, which provides a
valuable and unique insight and allows the
Board to better oversee and challenge
strategies for how we can continue to meet
and adapt to our customers’ needs.
The Board believes that the mechanisms
reported above provide an effective oversight
to ensure the culture within the Group
remains aligned with the Purpose, strategy
and Values of Spectris.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
92
Nomination and Governance Committee Report
Nomination and Governance Committee Report
“The Committee spent considerable
time reviewing the skills and
capabilities of the current Board and
identifying areas of focus for future
Non-executive Director recruitment.”
Mark Williamson
Chairman of the Nomination and Governance
Committee
During 2023, the Committee has been focused on the Board’s composition,
succession planning at a Board and Executive level, the development of the
Group’s approach to Diversity, Inclusion and Belonging, and the widening
of the Committee’s remit to incorporate the review of Board oversight and
governance activities.
Succession planning
The Committee spent considerable time
reviewing the skills and capabilities of the
current Board and identifying areas of focus
for future Non-executive Director recruitment.
Recognising the tenure of Bill Seeger and Ulf
Quellmann, particular thought was given to
their succession and ensuring the Board
would continue to comprise an appropriate
mix of skills and experience following their
retirement. The key outcome of this work
during the year was the appointment of
Mandy Gradden who joined the Board in
October 2023. Mandy brings to the Board
significant experience in finance, investor
relations, strategy, digital and software, and
will be appointed Chairman of the Audit and
Risk Committee following Bill Seeger’s
retirement from the Board at the 2024 AGM.
The Committee also oversaw the initiation of
the succession process for Ulf Quellmann,
which remains ongoing at the time of this
report. In recognition of the significant
strategic experience that Ulf brings to the
Board, the Committee recommended to the
Board that Ulf continue in role for one further
year to support the continuation of the
thorough process to select his successor and
to ensure the continued depth of Group-
related experience following the retirement of
Bill. As part of this recommendation it was
highlighted that Ulf would not continue his
role on any Committee following the 2024
AGM reflecting the Code best practice.
In respect of wider succession planning for
the Executive and senior management, the
Committee continued to receive regular
updates from the Chief Executive and the
Group HR Director. Good progress has also
been made to develop the skills of the
leadership community within the Group,
including the commencement of the
second cohort of the Spectris Leadership
Development Programme, Ascend. The
Committee is pleased with the progress
being made in respect of leadership
development across the Group and
recognises the need to continually refresh
the Group’s talent pipeline. During the year
the Committee members spent time with
senior leaders below Executive level in various
formal and informal settings to ensure they
maintained a good understanding of the
depth of senior talent and potential within
the Group.
Diversity, Inclusion and Belonging
The Committee and I strongly believe that
Board members should bring a blend of
expertise and skills with a variety of
perspectives, to facilitate constructive
discussions and effective, balanced decision-
making. This underpins the FTSE Women
Leaders Review and the Parker Review, which
emphasise the importance of ensuring
Boards are diverse in gender, as well as ethnic
and social background. The Committee fully
endorses this view and is focused on ensuring
that diversity is central to its work on
succession planning. The composition of the
Board is fully compliant with both the FTSE
Women Leaders Review and the Parker
Review. In 2023, the Committee was proud to
oversee the development of the Group’s
Diversity, Inclusion and Belonging
workstream and to endorse the setting of a
target of 40% of senior leaders across the
Group to be women by 2030. The Committee
also oversaw the progress made by the Group
to develop an understanding of the ethnic
diversity present at a senior management
level in the business with the aim of setting
an ambition to increase representation across
the Group. Further details of the activity
undertaken by the Group during the year are
set out on pages 56 and 57.
A refreshed remit
As a key outcome of the 2022 external Board
evaluation exercise, during the year the
Committee’s remit was refreshed to formally
include oversight of the Group’s governance
structures. This change was made to reflect
the growing importance of wider governance
structures at Board level to oversee the
Group’s approach to environmental, social
and governance (ESG) matters. This wider
oversight role now formally includes
workforce engagement activities overseen by
Kjersti Wiklund and the work undertaken by
Alison Henwood to oversee the Group’s
sustainability strategy. To support this work,
the Committee received regular updates
from the Head of Corporate Affairs on the
emerging ESG regulatory landscape to
ensure that the Group’s governance
structures remained appropriate.
Mark Williamson
Chairman of the Nomination and Governance
Committee
28 February 2024
Read our Board Diversity Policy
www.spectris.com/corporategovernance
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
93
Nomination and Governance Committee Report continued
Role of the Committee
The Committee leads the process for Board
appointments and makes recommendations
to the Board in this regard. In fulfilling this
role, the Committee evaluates the balance
of skills, experience, independence and
knowledge on the Board. The Board values
diversity and considers the importance of
diversity, in all its forms, when recruiting new
Board members. In 2023, the role of the
Committee was extended to include the
review of the overview of the Group’s
governance structures and processes, which
includes those structures put in place to
support the Board’s oversight of the Group’s
sustainability strategy and approach to
workforce engagement.
Full terms of reference for the Committee
can be found at
www.spectris.com/corporategovernance
The Committee’s performance was assessed
as part of the Board’s internally conducted
annual effectiveness review and is considered
to be operating effectively. Further details on
the evaluation process are set out on page 88.
Membership and attendees
Throughout 2023 all Non-executive Directors
were members of the Committee. Regular
attendees at the meetings also include the
Chief Executive and the Group HR Director.
Other attendees joined for topical
discussions, including the Chief Financial
Officer and Head of Corporate Affairs to
discuss the Group's approach to Diversity,
Inclusion and Belonging. The biographies of
the members of the Committee can be found
on pages 80 and 81 and attendance at
Committee meetings on page 84.
Activities of the Committee
during 2023
During the year, the Committee’s key
activities included:
• a deep dive into the Group’s talent strategy
and priorities;
• an in-depth review of the results and
emerging trends from the Group’s third
annual employee engagement survey;
• reviewing and recommending to the Board
the ambition that at least 40% of senior
leadership roles would be filled by women
by 2030;
• reviewing and recommending to the
Board, the Group’s approach to developing
a target on ethnic diversity aligned to the
requirements of the Parker Review;
• regular updates from Kjersti Wiklund as
Workforce Engagement Director;
• considering the independence of each
Non-executive Director and their time
commitments;
• reviewing relevant legal and regulatory
requirements and the Group’s proposed
response;
• receiving regular updates from Alison
Henwood, as the Non-executive Director
responsible for sustainability oversight on
the progress of the Group’s sustainability
strategy; and
• the annual review of the Board’s skills and
capabilities matrix; and succession
planning.
During 2023, the Committee placed
considerable focus on the Board’s succession
pipeline, recognising that both Bill Seeger and
Ulf Quellmann would have served nine years
on the Board ahead of the 2024 AGM. In
addition to merit and objective criteria, the
Committee ensured that the selection process
followed promoted diversity of gender, social
and ethnic background, and fully considered
the cognitive and personal strengths of the
candidates and how their skills, experience
and approach would complement the Board.
The process also considered the candidates’
existing appointments and associated time
commitments as well as any actual or potential
conflicts prior to their recommendation to the
Board. In support of their considerations, the
Committee reviewed the existing skills and
capabilities of the Board, the future skill set
required and the Board’s Diversity Policy. The
Committee was supported by the external
recruitment agency, the Lygon Group, in the
selection process for Bill’s successor.
Following a thorough process, the Committee
oversaw the selection and recommendation
of Mandy Gradden as an Independent
Non-executive Director to the Board.
Following Mandy’s successful appointment
and on-boarding, the Committee further
recommended Mandy’s appointment as
Chairman of the Audit and Risk Committee
following Bill’s retirement from the Board at
the 2024 AGM.
At the same time, the Committee also
undertook a high-level market search for a
suitable successor to Ulf. However, it was
considered important to first secure a
suitable successor for Bill, with the necessary
skill set to assume the role of Chairman of the
Audit and Risk Committee and then
reconsider the skills and capabilities present
on the Board to ensure that the
appointments were complementary.
Following the appointment of Mandy, the
Committee then engaged Egon Zehnder to
support the active search for a Non-executive
Director with complementary skills, focused
on Ulf’s significant experience and skill in
strategy development and implementation.
At the date of this report, the search remains
in progress.
In line with the requirements of the Code,
the Committee can confirm that there is no
further connection between the Lygon
Group and the Company or individual
Directors. Egon Zehnder has also supported
the Group with senior leadership recruitment
in addition to its role in the Non-executive
search process.
Recognising the ongoing nature of the search
for Ulf’s successor, the Committee has
recommended to the Board that Ulf be
recommended for re-appointment as a
Non-executive Director at the 2024 AGM to
serve up to one further year on the Board to
ensure continuity of experience and skills.
Recognising the spirit of the Code, Ulf will
retire from the Remuneration, Audit and Risk
and Nomination and Governance Committee
at the 2024 AGM.
The Committee feels that the Board’s overall
composition has a broad range of skills and
experience, with a variety of different lengths
of tenures which will provide a good basis for
any short-term succession challenges. To
maintain this position, ongoing succession
planning continues to form an ongoing part
of the Committee’s regular agenda, including
the annual review of the skills and capabilities
matrix (which not only informs the
appointment process, but also the training
and development programme for the Board).
In respect of the longer-term Board
composition, as Board members progress
through their tenure, the Committee
continues to consider their independence, the
role they play within the boardroom and how
it may need to plan for the departure of
Directors. This includes having clear succession
pipelines for the key roles on the Board, as well
as the Executive Director positions.
Workforce engagement
The Committee has continued to receive
regular updates from Kjersti Wiklund as the
Workforce Engagement Director on
engagement meetings that took place during
2023. Building on previous engagements,
in 2023, Kjersti was accompanied on key
workforce engagement interactions by other
Non-executive Directors. In April, Ravi
Gopinath joined Kjersti on a three-day
engagement deep-dive visit to Korea, during
which they met with senior management and
groups of employees from each business. In
September, Alison Henwood joined Kjersti at
the HBK facility in Virum where they met with
groups of employees based at the site. During
the planned Board visit to the Malvern
Panalytical facility in Almelo, Cathy Turner
joined Kjersti for employee engagement
meetings. All meetings took place without
senior management present and further
details are set out on page 89. In addition to
these in-person meetings, Kjersti also met
separately with the HR Director of each
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 94
Nomination and Governance Committee Report continued
Division and with the Group HR Director to
review the trends in employee engagement
and key people-related activities.
Board Diversity Policy
During the year, the Board’s Diversity Policy was
reviewed and extended to include the ambition
that by 2030, 40% of the Group’s senior
leadership community would be women.
External appointments and time
commitments
External directorships and conflicts of
interest are declared by Directors on
appointment and are reviewed at least
annually by the Committee. Any external
appointments are carefully considered,
including the impact on the individual
Director’s ability to meet the necessary
time commitments. Conflicts of interest are
recorded and reviewed together with any
evidence of situational or transactional
conflicts, as well as each Director’s
shareholding in the Company. This helps
to ensure that the judgement of the Board
remains uncompromised and independent.
The Board considers all Directors have
sufficient time to meet their Board
responsibilities. Details of the Directors
external appointments are included in
their biographies on pages 80 and 81.
Director election and re-election
In considering the recommendation of the
election and re-election of Directors, the
Committee considers a number of factors.
These include: the results of the individual
evaluation process; the tenure and
independence of each of the Directors;
and the other external appointments held
by the Directors.
Any potential conflicts of interest are also
considered. This review allows the Board to
consider any circumstances that are likely to,
or could, impair a Non-executive Director’s
independence. With the support of the
Committee’s recommendation, the Board
has concluded that all Non-executive Directors
being recommended for re-election are
considered to be independent.
Board skills and experience
Very experienced
Experienced
Mark
Williamson
Andrew
Heath
Derek
Harding
Cathy
Turner
Ravi
Gopinath
Bill
Seeger
Ulf
Quellmann
Kjersti
Wiklund
Alison
Henwood
Mandy
Gradden
Strategy and M&A
Finance and accounting
Risk management/
regulation/governance
Digital and technology
(including cyber and AI)
Science and engineering
Sustainability
Operating model/change
management
Talent and remuneration
International business
experience
Listed CEO/CFO
Non-executive Directors’ tenure
The Committee monitors a schedule of the Non-executive Directors’ tenure
and reviews potential departure dates assuming the relevant Directors are not
permitted to serve more than three three-year terms (nine years) from their
appointment date, unless in exceptional circumstances (see the chart below).
Board overview
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
7
2
0
2
8
2
0
2
9
2
0
2
0
3
0
2
1
3
0
2
2
3
0
2
Non-Executive
Directors
Ravi Gopinath
Mandy Gradden
Alison Henwood
Ulf Quellmann
Bill Seeger*
Cathy Turner
Kjersti Wiklund
Mark Williamson
* Bill Seeger completed nine years’ of service on the Board in January 2024 and he will retire
from the Board at the conclusion of the 2024 AGM. More information on succession planning
can be found on page 92.
Overboarding scores1
Nationality of Directors
1 mandate
2 mandates
3 mandates
4 mandates
5 mandates
1 Director
British
1 Directors
American
5 Directors
German
3 Directors
Norwegian
No Directors
Singaporean
Board tenure
1–3 years
3–6 years
6 years+
Gender
Male
Female
3
3
4
6
1
1
1
1
60%
40%
1 Based on 2024 ISS Guidance, which classifies any person with more than
5 mandates at a listed company as overboarded. A Non-executive
Directorship counts as 1, a Non-executive chairmanship counts as 2 and
an Executive Director position (or comparable role) counts as 3.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
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Audit and Risk Committee Report
Audit and Risk Committee Report
“The Group has evolved immeasurably
during my tenure and the
responsibilities and focus of the
Committee has evolved successfully
to mirror this change.”
Bill Seeger
Chairman of the Audit and Risk Committee
This is my final report to you as Chairman of the Audit and Risk
Committee as I will retire from the Board following completion of my nine
years’ tenure at the 2024 AGM. The Group has evolved immeasurably
during my tenure and the responsibilities and focus of the Committee
has evolved successfully to mirror this change.
I am proud of the oversight structures
developed by the Committee and the
strength of our relationship with our
external and internal auditors and with the
management team. I have also been pleased
to see the development of the strength of the
finance community within the Group under
the guidance of Derek Harding.
In October 2023, Mandy Gradden joined the
Board and the Committee, and she will
succeed me as Chairman of the Committee
in May 2024. I have been very impressed with
Mandy’s experience and approach in our early
meetings and feel confident that she will
further develop the role and remit of
the Committee.
This report sets out the key activities of the
Committee during 2023. During the year, the
Committee’s core duties remained largely
unchanged and our usual cadence of
activities relating to financial reporting, risk,
assurance, and internal controls continued.
However, in recognition of the importance of
a continuous focus on risk management we
formalised the inclusion of an additional
Committee meeting each year focused on
the oversight of risk and internal control. The
Committee and I were pleased to oversee
the continued strengthening of the Group’s
internal audit provision under PwC.
In 2023, the Committee also focused on the
development of its oversight of the Group’s
ESG reporting and assurance processes,
supported by Alison Henwood, who in
addition to her Committee responsibilities
provides oversight of the Group’s
sustainability programme. The Group’s ESG
reporting is supported by limited assurance
provided by Deloitte in addition to its role as
external auditor and the Committee has
benefited from the experience, wider market
context and rigour that Deloitte has brought
to the review of the Group’s ESG reporting.
The Committee members benefited from
the Board’s visit to the Malvern Panalytical
site in Almelo, the Netherlands in October
2023. This visit offered a valuable opportunity
to meet key employees within the Malvern
Panalytical business and review the
development of the Group’s strategy. While
in Almelo I was pleased to join Derek
Harding in meeting with the team leading
the ERP transformation project for Malvern
Panalytical. We heard more about the
progress of work against the stage gate
review process being followed prior to
launch and the collaboration with HBK to
share lessons learned to help mitigate
against potential risks, as it also progresses
towards its ERP launch.
The Committee as a whole continues to
have dedicated time with the external and
internal audit teams at each meeting
without management present. I have also
continued to meet regularly with members
of these teams outside the Committee cycle,
as well as receiving regular updates from the
finance team on accounting judgements
and issues, risk and internal controls, and the
progress against the internal audit plans.
In 2024, a key focus of the Committee will be
overseeing the transition to the new external
audit partner, Rob Knight, as he transitions
into role following the completion of the
2023 year-end process. Beyond these
changes the Committee will focus on
adopting the changes in the revised UK
Corporate Governance Code released in
January 2024 (2024 Code) by further
developing the Group’s risk management
and internal control structures alongside the
launch of the new ERP system at Malvern
Panalytical and HBK, and the Group’s
further response to the developing
landscape of ESG regulations.
I do hope you find this report useful in
reviewing the work undertaken by the
Committee in 2023.
Bill Seeger
Chairman of the Audit and Risk Committee
28 February 2024
Role of the Committee
Membership and attendees
During 2023 the Committee was comprised
solely of the following independent
Non-executive Directors:
• Bill Seeger
• Kjersti Wiklund
• Ulf Quellmann
• Alison Henwood; and
• Mandy Gradden (from October 2023)
Bill Seeger, Mandy Gradden and Alison
Henwood are determined by the Committee
to have ‘recent and relevant financial
experience’ as required by the Code. All
members of the Committee are considered
to have competencies that the Board
deems relevant to the sectors in which the
Company operates.
Attendees at meetings normally include the
Chairman, the Chief Executive, the CFO, the
Head of Risk and Control, and the Head of
Corporate Affairs. Representatives from the
external auditor, Deloitte, and the internal
auditor, PwC, also attend meetings.
Read more about the current members of the
Committee on pages 80 and 81
Details of attendance at Committee meetings is
set out on page 84
Roles and responsibilities
The Committee supports the Board in
fulfilling its responsibilities in respect of:
• overseeing the Company’s financial and
narrative reporting processes, including
advising the Board on the fair, balanced
and understandable assessment of the
information provided;
• reviewing, challenging and approving
significant accounting judgements (see
pages 97 and 98) proposed by
management;
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
96
Audit and Risk Committee Report continued
• reviewing and monitoring the way in which
management ensures and oversees the
adequacy of financial, risk management
and internal controls;
• the appointment, remuneration,
independence and performance of the
Group’s external auditor;
• the independence and performance of the
Group’s internal audit arrangements;
• ensuring that relevant and significant areas
of risk management are appropriately
considered and addressed; and
• that additional consideration is given to
relevant regulatory developments and
emerging best practice.
The full Terms of Reference setting
out the activities of the Audit and Risk
Committee are available at
www.spectris.com/corporategovernance
Audit Committee meetings
In response to the 2022 external Board
evaluation outcomes and investor feedback,
the Committee made the decision to
schedule an additional meeting each year,
bringing the total scheduled meetings to four.
The additional meeting held in October 2023
focused on the effectiveness of the Group’s
current risk and controls framework and the
work undertaken during the year by the
external auditor, Deloitte, and the internal
auditor, PwC. The Terms of Reference for the
Committee were amended to include a
minimum of four meetings per year. Informal
discussions on key topics were also held
outside of meetings when required. The
Committee retained time around each
meeting to meet separately without
management present and invites the PwC
internal audit co-source partner and
representatives from the external auditor to
attend for part of this session.
Significant matters considered during
the year
The Code requires, on a comply or explain
basis, that the Committee report on the
significant matters considered during the
year. In 2023, the Committee considers that
the most important matters were:
• continuing to support preparations in
response to the planned UK regulatory
changes on internal control provisions,
including receiving updates from the Head
of Risk and Control and PwC as well as the
views of Deloitte as the external auditor on
the enhancements to the internal controls
framework;
• consideration and decisions around the
accounting for transactions within the
business, including the completion of the
Concept Life Sciences divestment in March
2023, the planned divestment of Red Lion
and the acquisition of MicroStrain, EMS, the
XRD product line from Freiberg
Instruments and the investment in
LumaCyte; and
• providing oversight of the Group’s ESG
reporting and assurance processes,
supported by Alison Henwood.
In July 2023, the Group received a letter from
the FRC asking us to explain how our
accounting policy to recognise revenue for
some installations prior to the performance of
any installation service complied with IFRS 15
‘Revenue from Contracts with Customers’.
In response, the Committee oversaw the
clarification that this component of revenue
was not material to the Group’s financial
statements for the year under review and the
explanation of the circumstances under
which this revenue had previously been
recognised in advance of performing an
installation service. The relevant disclosures
in this annual report have been updated.
Annual performance evaluation
During 2023, the Committee’s performance
was assessed as part of the Board’s internally
conducted annual effectiveness review. The
Committee is considered to be operating
effectively. Further details on the evaluation
process are set out on page 88.
Activities during 2023
The Committee has an annual forward
agenda developed from its Terms of
Reference. Standing items are considered at
each meeting, in addition to any specific
matters arising, and topical business or
financial items on which the Committee has
chosen to focus. The work of the Committee
in 2023 was principally split into four key areas:
• Accounting, tax and financial reporting;
• Risk management and internal controls;
•
•
Internal audit; and
External audit.
These topics are regularly considered in
conjunction with each other given the
importance of each element operating
cohesively. For clarity of reporting, details
of the Committee’s involvement in each of
these areas is set out separately below.
Accounting, tax and financial reporting
The Committee plays an integral role in
providing assurance to the Board around the
integrity of the half-year and annual Financial
Statements and the associated significant
financial reporting judgements, estimates
and disclosures. During 2023, as part of its
review of the half-year and annual financial
statements, the Committee has:
• considered the viability assessment and
scenarios, liquidity risk and the basis for
preparing the half-year and annual
Financial Statements on a going concern
basis, and reviewed the related disclosures
in the Annual Report and Accounts, the
provisions of the Code regarding going
concern and viability statements and
reviewed best practice and investor
comment;
• reviewed the areas of accounting
judgements such as revenue recognition
and the Vendor Loan Note and Eurazeo
investment (which formed part of the
consideration for the sale of Millbrook in
2021);
• reviewed the areas of accounting
judgements in respect of the Concept Life
Sciences disposal and the consolidation
requirements relating to the acquisition of
EMS, XRD product line from Freiberg
Instruments, MicroStrain and the minority
interest investment in LumaCyte
Incorporated;
• reviewed the overall drafting and review
processes to assure the integrity of the
Annual Report and Accounts;
• reviewed the management representation
letter to Deloitte as the external auditor and
the findings and opinions of the external
auditor;
• considered the process designed to ensure
Deloitte is aware of all ‘relevant audit
information’, as required by sections 418
and 419 of the Companies Act 2006;
• reviewed the effectiveness of the external
auditor;
• assessed the disclosures in the 2023 Annual
Report and Accounts in relation to internal
controls and the work of the Committee;
and
• reviewed the proposed update to the
Group’s tax strategy.
The Committee also carried out a regular
review of the Group’s ongoing litigation
matters and associated provisions.
Having reviewed and considered these key
areas, and following their review of the
process undertaken to ensure that the 2023
Annual Report and Accounts adhered to
relevant legal and regulatory requirements,
the Committee was able to recommend to
the Board that, when taken as a whole, the
2023 Annual Report and Accounts is fair,
balanced and understandable and contains
all relevant information necessary for
shareholders to assess the Company’s
position and performance, business model
and strategy.
The accounting policies are included in the
relevant notes to the Consolidated Financial
Statements. These are presented on pages
136 to 198. With the support of Deloitte, as
external auditor, the Committee has reviewed
the suitability of the accounting policies
which have been adopted and whether
management has made appropriate
estimates and judgements.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Audit and Risk Committee Report continued
Key areas of focus in relation to the Financial Statements
The Committee has reviewed the key judgements applied to the following significant issues in the preparation of the Financial Statements. The table below sets out the issue, its significance,
how the Committee considered it and any comments and conclusions reached.
Segmental reporting
Alternative performance measures (APMs)
Estimation, uncertainty and judgement
97
Issues and significance
The Group reports its operating segments and reportable
operating segments in accordance with IFRS 8. The
segmental platform structure reflects the current internal
reporting provided to the Chief Operating Decision Maker
(considered to be the Board) on a regular basis to assist in
making decisions on capital allocated to each segment
and to assess performance. The structure for 2023 remains
consistent with the prior year.
The role of the Committee
The Committee assessed whether the signed agreement
to dispose of Red Lion would impact the Group having
‘Other’ as a non-reportable operating segment. The
Committee also sought views from Deloitte.
Comments and conclusions
The Committee concluded that for the 2023 Annual
Report and Accounts in accordance with IFRS 5 Assets
Held for Sale accounting in agreement with Deloitte that
the ‘Other’ non-reportable operating segment would
remain. The Committee agreed to review the segmental
reporting structure should the Red Lion sale process
complete in 2024.
Issues and significance
The Group continues to monitor and consider whether the
items adjusted in the APMs are appropriate in accordance
with the Group’s policies. The Board has approved a
potential additional £6 million contribution to the Spectris
Foundation, subject to strong financial performance up to
2030. As part of this, the first £1 million contribution has
been approved and included in 2023. Given the one-off
nature of this campaign, this amount has been disclosed as
a new separate APM.
The role of the Committee
The Committee reviewed and considered the list of items
adjusted for within the APMs as well as the explanation and
disclosure of the APMs.
Comments and conclusions
The Committee was satisfied with the list of items adjusted
for within the APMs, including the addition of the £1 million
contribution, as well as the explanation and disclosure of
the APMs and supports that these add clarity to the
understanding of the Company’s financial performance.
The Committee reviewed and concluded that the relative
prominence of statutory measures compared to APMs
remains balanced.
Issues and significance
During the year, the Committee received reports and
recommendations from management to consider the
significant accounting issues, estimates and judgements
applicable to the Group’s Financial Statements and
disclosures.
The key sources of estimation uncertainty disclosed in the
Group’s 2023 Financial Statements are in relation to the
assumptions applied in the calculation of retirement
benefit plan assets and liabilities (note 19).
The role of the Committee
The Committee received confirmation from management
that they were not aware of any material or immaterial
misstatements made intentionally to achieve a particular
presentation.
The Committee considered the appropriateness of
disclosures and sensitivities with respect to the turbulent
macroeconomic environment particularly around risk
factors and their impact on discount rates.
The Committee reviewed and challenged presentations by
management and also questioned Deloitte to understand
whether the external auditor had, to the Committee’s
satisfaction, fulfilled its responsibilities with diligence and
professional scepticism and in a sufficiently robust manner.
Comments and conclusions
Following detailed review, challenging the presentations
and reports from management and where necessary,
consulting with the external auditor, the Committee is
satisfied that the Financial Statements appropriately
address critical judgements and key estimates (both in
respect of the amounts reported and the disclosures).
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 98
Audit and Risk Committee Report continued
Key areas of focus in relation to the Financial Statements continued
M&A activity
Principal Risks and uncertainties
Going concern and viability
Issues and significance
During 2023, management reassessed the appropriateness
of the Group’s existing Principal Risks and considered any
additional or emerging risks that might need to be
included. As a result of this reassessment no changes were
proposed to the existing categories of Group Principal Risk
and no new emerging risks were identified for inclusion.
Issues and significance
Management presented the Committee with an updated
calculation of going concern and an assessment of the
viability of the Group over a five-year period. This included
revised forecasts including using the latest Strategic Plan
which looked forward to 2027 plus an extrapolation of the
results to 2028 to cover the five-year period.
The role of the Committee
The Committee reviewed this process during its December
2023 and February 2024 meetings and considered the
appropriate disclosure for the Principal Risks and
uncertainties section and Viability Statement within the
Annual Report.
Comments and conclusions
The Committee endorsed the assessment of the Group’s
Principal Risks, and the respective scenarios considered in
the preparation of the Viability Statement.
This year further consideration has been given to the
impact resulting from the Group’s Principal Risks and
uncertainties including the impacts from climate change.
The role of the Committee
The Committee reviewed the papers received from
management in respect of the assessment of both going
concern and viability and challenged the assumptions
made by management in their assessment.
The views of the external auditor were also sought to
provide context and further challenge to the assumptions
in the papers.
Comments and conclusions
The Committee concluded that, given the cash profile and
strength of the financial forecast, the position of the Group
remained strong and that the financial statements could
continue to be prepared on a going concern basis. The
Committee also concluded, based on the outcomes of the
viability assessment, that it is reasonable to expect that the
Group would be able to continue to operate and meet its
obligations and liabilities as they fall due over the period to
31 December 2028.
Issues and significance
Concept Life Sciences (CLS) was divested on 31 March 2023.
CLS was not classified as held for sale at the 2022 financial
year end as the sale process was not sufficiently advanced
at that time.
The divestment of Red Lion was agreed in December 2023.
Red Lion is included in the ‘Other’ non-reportable
operating segment. Due to size and significance of the
business it was determined that Red Lion should be
treated as an Asset Held for Sale in accordance with IFRS 5.
The Group completed four acquisitions during the year.
12.2% of the share capital of LumaCyte was acquired in
August 2023. The Committee concluded that the Group
has a significant but not controlling interest and will
account for the investment and associated transaction
costs as an investment on the balance sheet, via the equity
method. A purchase agreement was signed in June 2023
to acquire MicroStrain and the acquisition was completed
in September 2023. MicroStrain forms part of the Spectris
Dynamics operating segment.
EMS was wholly acquired in October 2023 and will form
part of the Spectris Scientific operating segment and the
PMS cash generating unit. In October 2023, the Group
acquired Intellectual Property and know-how of the XRD
product line from Freiberg Instruments.. This will form part
of the Spectris Scientific operating segment.
The accounting implications of all the above were
presented for review.
The role of the Committee
The Committee reviewed the papers provided to the Board
and considered the relevant accounting judgements for
the transactions in question. Opinions were sought from
Deloitte.
Comments and conclusions
Following the Committee’s review of the accounting
treatments proposed by management for the four
acquisitions and one disposal that took place within the
year, the Committee was satisfied that the treatments
used were appropriate for each transaction.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 99
Audit and Risk Committee Report continued
Risk management and internal
controls
Internal control and risk management
systems
To assist the Board with its responsibilities to
effectively determine the nature and extent of
the Group’s significant risks, the Committee
carries out a robust annual assessment of the
Principal Risks and uncertainties facing the
Group. The Board remains ultimately
responsible for monitoring the risk
management and internal controls systems
which mitigate potential impacts on
shareholder investments and the Company’s
assets, and for reviewing the effectiveness of
those systems. Before reporting its findings
and recommendations to the Board, the
Committee ensures that its responsibilities as
set out in its Terms of Reference (available at
www.spectris.com) are adequately met.
This includes:
• evaluating and challenging the results and
recommendations of audits undertaken by
the internal audit team and the external
auditor;
• considering the level of alignment between
the Group’s Principal Risks and internal
audit programme;
• reviewing reports received on significant
control issues to the Group and considering
and challenging as necessary the adequacy
of management’s response to any matters
raised;
• overseeing the governance and risk
management framework, including a
definition of risk appetite by risk category
and Principal Risk, put in place throughout
the Group;
• appraising the Group’s response to
information security and data protection
risks;
• considering key emerging risks and
management’s approach to the ongoing
oversight and management of those risks;
• considering the Group’s ethics programme
and the anti-bribery and corruption
programme;
• considering common control themes
identified throughout the business and
where themes are identified, ensures that
subsequent action has been taken to
minimise the risk; and
proportionate Code revision and more time
for implementation.
• assessing the Group’s responsibilities relating
to regulated exposures of the Group.
Regular meetings were held between the
Head of Internal Audit and the Audit and
Risk Committee Chairman, who also held
discussions with the Head of Risk and Control.
Throughout 2023, the Committee has
continued to receive and review risk
management updates from the businesses by
way of reporting from the operating Business
Audit and Risk Committee Chairmen. Updates
on the Business Audit and Risk Committees
will remain as a standing item on its agenda
for future meetings.
The Committee’s primary responsibility in
respect of risk management and internal
controls systems is to review their
effectiveness and to make recommendations
for possible improvements as appropriate.
The Board notes that, as with all such systems,
the Group’s approach to risk management
and internal controls is designed to manage,
rather than eliminate the risk of failure to
achieve business objectives and can therefore
not provide absolute assurance against
material misstatement or loss.
Preparation for changes in audit and
governance reform
In May 2023, the Financial Reporting Council
(FRC) launched a public consultation on
proposed revisions to the Code, following the
UK Government’s response to the White
Paper on ‘Restoring Trust in Audit and
Corporate Governance’. Draft legislation
setting out additional reporting requirements
for companies was also issued in July 2023,
which proposed to introduce further
disclosures, including the requirement for the
publication of an Audit and Assurance Policy.
In 2024 the Committee will focus on ensuring
that the Group’s compliance strategy and
methodology for evaluating and concluding
on the adequacy and effectiveness of internal
controls as required by the 2024 Code. This
includes proceeding with changes to the
reporting requirements regarding internal
controls, albeit with a more targeted and
The Group has continued to develop and
enhance its internal control and risk
management processes in 2023 in readiness
for these changes. This work has included, in
particular, working alongside critical business
transformation projects to ensure adequate
controls have been designed, tested and
documented as part of the system
implementation, and building a group
governance, risk and compliance tracker
which can track and report on risks,
associated controls and further risk mitigation
actions as well as on actions arising from
internal audit findings.
During the year the Committee received
regular updates from the Head of Risk and
Control as well as routine updates from the
business audit and risk committees. It also
received a detailed update at each meeting
on the proposed legislative and Code
changes and the progress being made to
enhance the internal controls framework.
The Committee will continue to receive
regular updates and engage closely with
management on any changes that might
benefit the Group’s existing approach to
internal controls and to ensure compliance
with legislation and best practice as they
are updated.
Throughout the year, the Committee has
monitored the Group’s internal control and
risk management systems and at its meeting
in February, specifically reviewed the
effectiveness of these.
Key areas of focus for 2024
• continue to work alongside business
transformation projects to embed risk and
internal controls within the business
systems in place across the Group;
• enhance the risk-based approach taken to
considering other controls improvement
work, specifically for financial, operational
and compliance controls;
• oversee the Group’s approach to
compliance with the Corporate
Sustainability Reporting Directive.
• refine the target operating model for risk,
control and internal audit and leveraging
the Group governance, risk and compliance
tracker; and
• continue to oversee the Group’s
compliance with the implementation of the
Corporate Sustainability Reporting
Directive.
The ongoing work to further enhance internal
controls will lead to better assurance and
efficiencies through the opportunities to
formalise and automate controls and gain
better quality of information for decision-
making purposes.
Ethics and compliance and the Spectris
confidential helpline
The Committee receives updates on any
reports raised through the Group’s
independent and confidential helpline, and the
status of associated investigations (further
details of the Group’s Speak Up Policy can be
found on page 58). The Committee also reviews
the control procedures in place to comply with
the Group’s policies on business ethics,
anti-bribery, compliance and fraud, including
the steps being taken to enhance the Group’s
ethics and compliance programme.
2023 Viability Statement
The Committee reviewed the preparation of
the 2023 Viability Statement and considered
the following factors which could impact the
duration over which the Viability Statement
is made:
• budgeting, forecasting and strategic
planning cycles;
• the time frame over which are risks are
assessed;
• the approach taken by our peers; and
• proposed changes in corporate reporting
requirements regarding long-term resilience.
The Committee remains of the view that the
statement made regarding the Company’s
viability period continues to be an accurate
assessment of the Company’s viability as at
the date of the report.
Read more about the 2023 Viability Statement
on page 51
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
100
Audit and Risk Committee Report continued
The Committee reviewed
the work performed by
PwC throughout 2023 and
concluded that the transition
to the fully outsourced
model was effective, and the
assurance provided by the
internal audit function
remained strong.
Internal audit
The purpose of internal audit is to provide
independent, objective assurance to add
value and improve the Group’s operations.
Its responsibilities include assessing the key
risks of the organisation and examining,
evaluating and reporting on the adequacy
and effectiveness of the systems of internal
control and risk management in place, and
the governance processes in operation
throughout the Group.
During 2023, the Internal Audit function
continued to be led through an outsource
arrangement by PwC, with a lead internal
audit partner as the Head of Internal Audit,
with oversight provided by the Committee.
The Committee is required to provide
assurance to the Board on the adequacy of
the resourcing and internal audit planning.
It is also responsible for monitoring the
effectiveness of the internal audit function.
During 2023, the outsource arrangement
with PwC operated smoothly, with positive
progress made in the delivery of risk-based
reviews, engagement with the business,
recommendation activities, and subsequent
reporting. The outsource function works
closely with the divisional structure of Spectris
Scientific and Spectris Dynamics, to better
utilise the capability and flexibility of PwC,
focusing on the key risks across the Group
and in each business. The internal audit
plan and approach is then tailored to the
respective needs of each business.
Internal audit planning
The Committee has received regular reports
from the Head of Internal Audit regarding the
status of the internal audit plan and the
reports generated from these audits. The
majority of actions raised as part of the 2023
internal audit plan have been implemented,
with the remaining actions clearly owned and
progressing with management.
At its final meeting in 2023, the Committee
also considered the internal audit plan for
2024. The plan was developed using a
risk-based approach and has taken into
consideration the organisational objectives
and priorities, as well as possible risks that
may prevent the achievement of those
objectives. Internal audit will continue to work
closely with the risk and control function to
monitor the 2024 internal audit plan and
ensure that it remains relevant and responds
to any changes in the risk profile of the
business. The Committee was pleased to
approve the 2024 internal audit plan. The
Committee will continue to be updated at
each session on the progress against the plan
as well as receiving updates on the outcomes
of these audits and how promptly actions
have been addressed.
Effectiveness of internal audit
Following the transition from a co-source
internal audit arrangement during 2022, the
Group progressed to a fully-outsourced
arrangement with PwC at the start of 2023.
The Committee reviewed the work
performed by PwC throughout 2023 and
concluded that the transition to the fully
outsourced model was effective, and the
assurance provided by the internal audit
function remained strong.
Business audit and risk committees
In each of its meetings during the year the
Committee received an update from one of
the businesses in respect of topics discussed
by that business’s audit and risk committee.
These business audit and risk committees,
which meet quarterly and are chaired by the
business unit CFOs, provide the opportunity
for each business to consider actions from
internal audit reports, to discuss business risk
registers and to review updates in respect
of ethics and compliance matters. The
Committee was informed about the process
by which the business audit and risk
committees support the existing internal
audit and risk management framework and
received assurance on the ways in which
businesses track and monitor risk within
their functions.
External auditor
One of the Committee’s key responsibilities is
to manage the relationship with the Group’s
external auditor on behalf of the Board.
Deloitte LLP was appointed as the Company’s
auditor in 2016, with effect from 1 January
2017, following a competitive tender process,
and has now completed its seventh year as
auditor. Andrew Bond has held the role of
lead audit partner since March 2019. Rob
Knight will become our new audit partner
following the completion of the 2023
year-end process.
External audit process
The external audit for the year ended 31
December 2023 has been carried out with a
combination of remote and in-person work.
Document repository sites have continued to
be utilised as an effective way of reviewing
documentation to support the audit. The
Committee receives regular reports from
Deloitte at its meetings and management
and the Chairman of the Committee maintain
an ongoing dialogue with the external audit
team outside of the usual meeting cycle. This
has provided comfort to the Committee on
the steps that have been put in place to
ensure that there was no adverse effect on
the quality or the timescale for the
completion of the audit of the financial
statements. Andrew Bond has been present
in every Committee meeting during the year.
Rob Knight, who will become our new audit
partner following the completion of the 2023
year-end process, attended a number of
meetings as part of the transition into this
role. The Committee has also:
• considered and approved the audit
approach, the scope of the audit
undertaken by Deloitte as external auditor
and the fees for the same;
• agreed reporting materiality thresholds;
• reviewed reports on audit findings; and
• considered and approved letters of
representation issued to Deloitte.
Audit and non-audit fees
The engagement letter for the audit of the
2023 Financial Statements was reviewed by
the Committee, and, in accordance with the
authority given to the Committee at the 2023
AGM, the Committee reviewed the proposed
remuneration of Deloitte. The Committee
considered the proposed auditor’s
remuneration to be appropriate.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Audit and Risk Committee Report continued
Following the Committee’s
own assessment of the
performance, independence
and effectiveness of Deloitte,
the Committee is satisfied
that Deloitte continues to
remain effective in its role as
external auditor.
101
The Committee believes that non-audit work
may only be undertaken by the external
auditor in limited circumstances. A
cumulative annual cap is imposed for
non-audit services provided by our external
auditor (save for acquisition due diligence),
above which all engagements are subject to
the Committee’s prior approval.
The Committee’s Non-audit Services Policy is
available at
www.spectris.com/corporategovernance
The Committee’s Non-audit Services Policy
is used to safeguard Deloitte’s independence
and objectivity. Non-audit fees for services
provided by Deloitte for the year amounted
to £0.1 million (3.7% of the total audit fee). As
in previous years, a proportion of these fees
were in respect of the half-year review. In
addition, non-audit services in the year
included the engagement of Deloitte to
produce an interim review of the Group’s
Danish subsidiary in accordance with
ISRS 4400 for the DPA filing. Deloitte was
considered best placed to support the
Company in this role as a result of its unique
knowledge of the Group, having considered
the threats to auditor independence
including non-audit service fee caps for the
Group and the UK. The work was deemed
incidental to the audit service. Further details
are included in note 4 to the Consolidated
Financial Statements.
The Committee considered the engagement
of Deloitte and was comfortable that the
engagement did not adversely impact the
independence of the external auditor and was
in line with the Group’s Non-audit Services
Policy. Further details are included in note 4
to the Financial Statements.
Effectiveness of the external auditor
To assess the effectiveness of the external
auditor the Committee reviewed:
• the external auditor’s fulfilment of the
agreed audit plan and variations from it
(including changes in perceived audit risks
and the work undertaken by the external
auditors to address those risks); and
• reports highlighting key items that arose
during the course of the audit.
During the year, the Committee carried out
the annual effectiveness review of the
external auditor. The findings of this review
were reported in detail to the Board. The
review process included:
• considering the independence of Deloitte;
• the Deloitte Audit Quality Inspection
Report;
• non-audit work undertaken by the external
auditor;
• feedback from a survey targeted at various
stakeholders; and,
• the Committee’s own assessment.
The stakeholder survey was refreshed
during the year in light of achieving higher
standards of audit quality, and the increased
government and regulatory focus on audit/
auditor effectiveness in line with the Code,
and the planned introduction by the FRC on
the minimum standard for audit committees.
The resulting assessment was more
comprehensive than in previous years.
There were no significant findings following
the review and it was concluded that the
audit process continued to be effective. Minor
findings from the stakeholder survey have
been actioned during the year by Deloitte
and incorporated into its 2024 work plan.
To fulfil its responsibility for oversight of the
external audit process, the Committee is
responsible for reviewing:
• the terms, areas of responsibility, associated
duties and scope of the audit as set out in
the external auditor’s engagement letter;
• the overall work plan and fee proposal;
• any significant issues that arose during the
course of the audit and their resolution;
• key accounting and audit judgements;
• the level of errors identified during the
audit; and
• the content of, and any recommendations
made by the external auditor in, their
management letters and the adequacy of
management’s response.
External auditor re-appointment
The Committee reviews annually the
appointment of the external auditor, taking
into account the auditor’s effectiveness and
independence, and makes a recommendation
to the Board accordingly. Any decision to open
the external audit to tender is taken on the
recommendation of the Committee.
Following the Committee’s consideration of
the effectiveness of Deloitte as the Company’s
external auditor, it is proposed that Deloitte be
re-appointed as auditor of the Company at the
next AGM in May 2024 and, if so re-appointed,
that it will hold office until the conclusion of
the next general meeting of the Company at
which accounts are laid. Further details are set
out in the Notice of Meeting, which is available
at: www.spectris.com/AnnualGeneralMeeting
Deloitte was appointed as the Group’s external
auditor for the 2017 audit following a formal
tender process and their reappointment was
last approved by shareholders at the 2023
AGM. During the year, the Committee
reviewed the arrangements with the current
external auditor and considered whether it
was appropriate to initiate a tender process.
The Committee noted that given the
knowledge and standard of services provided
by Deloitte, it would be in the best interests of
the Company and its stakeholders for Deloitte
to continue as auditor. It is the Committee’s
present intention to initiate a competitive
tender process for the external auditor in 2026.
The Group will continue the practice of the
rotation of the key audit engagement partner
at least every five years, with all other team
members required to rotate at least every
seven years. In support of this practice, Rob
Knight will succeed Andrew Bond as audit
engagement partner in 2024. As detailed
above, the Group complied with the Statutory
Audit Services Order 2014 throughout 2023.
Read more about the independent
external auditor’s report to shareholders
on pages 129 to 135
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
102
Directors’ Remuneration Report
Remuneration Committee Chairman’s statement
“I remain confident that the Group’s
Remuneration Policy supports the
delivery of the Group’s Strategy for
Sustainable Growth.”
Cathy Turner
Chairman of the Remuneration
Committee
On behalf of the Board, I am pleased to present my report as Chairman of
the Remuneration Committee for the year ended 31 December 2023.
This report provides a comprehensive picture
of the structure and scale of our remuneration
framework, its alignment with both the
Group’s strategy and the wider workforce.
The report sets out the decisions made by
the Committee as a result of business
performance for this year and the intended
arrangements for 2024.
2023 Remuneration policy
Shareholders approved the Group’s
Remuneration Policy (the Policy) at a General
Meeting on 13 December 2022. The Policy
received over 95% of votes in favour of its
approval and came into effect on 1 January
2023. The Committee remains confident that
the Policy supports the Group’s Strategy for
Sustainable Growth and provides a balance
between motivating and challenging our
Executive Directors and senior management
to deliver our business priorities and also
driving the long-term sustainable success of
the Group.
The context of remuneration in 2023
Our performance
In 2023, the Group delivered an excellent
performance, delivering on the commitments
set out at our Capital Markets Day in 2022.
Adjusted operating profit grew by 18% and
adjusted earnings per share increased by 25%.
The delivery of higher quality, more profitable
growth is evidenced by continued margin
expansion resulting in an 18.1% adjusted
operating margin. This strong performance
reflected the Group’s successful navigation of
challenging markets, geopolitical uncertainty
and the continuing conflict in Ukraine and
the resulting energy crisis, demonstrating the
resilience of our strategy and business model.
This continued performance has delivered a
further year of dividend per share growth.
Over the last year, we delivered continued
high returns and strong growth.
Our people
The Group’s employees are at the heart of our
delivery against our Strategy for Sustainable
Growth. The Committee is focused on
ensuring that our people are rewarded
appropriately based on their experience,
location and contribution to the Group.
The Committee reviews various aspects of
the wider workforce’s remuneration and
considers such information when
determining the approach to executive pay.
In 2023, the Committee received regular
updates relating to the Group’s wider pay
arrangements.
As part of the Board’s commitment to
workforce engagement, I was also pleased
to join Kjersti Wiklund in meeting with
employees at our Almelo site where we
discussed remuneration alongside other
aspects of employee engagement. I look
forward to taking part in further discussions
with employees in 2024.
2023 annual bonus outcome
As highlighted above, the Group’s
performance in 2023 was excellent, with
increases in both like-for-like sales and
profit. This contributed to bonus outcomes
for 2023 of 95.6% of the maximum bonus
opportunity for Andrew Heath and 96.2%
of the maximum bonus opportunity for
Derek Harding.
Only formulaic adjustments have been made
to the annual bonus targets in line with plan
rules, to reflect the disposal of companies
throughout the year. This approach is
consistent with prior years and ensures the
bonus outcome accurately reflects the
underlying performance of the business. In
accordance with the Policy, 50% of any
outturn from the bonus will be deferred into
shares. No discretion has been applied to the
2023 annual bonus outcome. Full details of
the 2023 annual bonus performance
outcome are set out on page 107.
2023 LTIP grant
In March 2023, the Committee granted
awards under the Long Term Incentive Plan
(LTIP) to both Executive Directors in line with
the Group’s Remuneration Policy.
2021 LTIP outcome
Both Executive Directors were granted an
LTIP award in March 2021 that will vest at 71%
of the total maximum opportunity on 17
March 2024 and is thereafter subject to a
further two-year vesting period. Earnings Per
Share (EPS) and Return on gross capital
employed (ROGCE) performance has been
strong over the period. This has resulted in the
award subject to both performance
conditions vesting in full. However, based on
interim results as at 31 December 2023, the
Total Shareholder Return (TSR) performance
related multiplier did not meet the threshold
performance targets for absolute TSR, despite
the very strong relative TSR performance
against the peer group during the period. This
element of the award is therefore not
expected to payout (the final measurement
of TSR will be at 16 March 2024). This
demonstrates the high level of stretch that is
built into the TSR component of the LTIP. No
discretion has been applied to the 2021 LTIP
outcome. Full details of the estimated 2021
LTIP performance outcome are set out on
pages 110 and 111.
2024 remuneration outlook
The Executive Directors salaries were
reviewed by the Committee in February 2024
with a 3.0% increase agreed with effect from 1
April 2024 in line with the average pay
increase across the wider Spectris employee
population. The fee structure for the
Chairman and Non-Executive Directors was
also reviewed in February 2024 with increases
taking effect from 1 April 2024.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Directors’ Remuneration Report continued
103
Chairman’s fee
The Committee reviewed the Chairman’s
fee in the context of the current size and
complexity of the business which has
materially increased since his appointment in
2017. This review showed that the Chairman’s
current fee of £250,000 is significantly below
the market levels expected in the FTSE
50-150, which Spectris currently sits around
the middle of on a market capitalisation basis.
Therefore, the Committee has agreed to
increase the Chairman’s fee from 1 April 2024
to £350,000. This change reflects the size and
complexity of the Chairman’s role and aligns
with the appropriate fee levels at the median
of our peer group. The Chairman’s fee will
remain subject to review and possible
inflationary increases in future years as
normal, however no further material changes
are expected in the near term.
A summary of the planned implementation
of the Policy in 2024 is set out on page 104.
The Committee continues to spend
considerable time deliberating the right
balance between policy, performance and
fairness to all stakeholders. We are confident
that the Policy and the proposed
implementation of the Policy reflects this
balance and the Committee therefore
recommends this report to shareholders.
Closing remarks
The Committee’s performance was assessed
as part of the annual Committee evaluation.
I am pleased to report that the Committee is
regarded as operating effectively and that the
Board takes assurance from the quality of the
Committee’s work.
I would like to thank the Committee for
its work during the year and our shareholders
for their support. Thanks also to our executive
team for their decisive leadership and
continued efforts to deliver value to our
stakeholders.
I hope that you will find this report useful in
understanding the reward structure in place
to support strong and sustainable results and
will support the judgements made by the
Committee this year. If required I would be
happy to discuss any matters contained in
this report.
Cathy Turner
Chairman of the Remuneration Committee
28 February 2024
2023 Remuneration Policy – Our Remuneration Structure
The diagram depicts our remuneration structure for the year ended 31 December 2023.
LTIP
280% of salary
Annual bonus
150% of salary
3 year performance period
2 year holding
period
Shares
Shares
Performance measures: EPS, ROGCE, ESG and
Absolute TSR (with Relative TSR gateway)
50% deferral of
any bonus earned
Shares
Cash
3 year deferral period
Shares
Pension 10.5% of
salary for current
Executive Directors
and new joiners
Cash
Salary
Cash
Additional features:
Shareholding requirement:
430% of salary for all Executive Directors
Two year post cessation shareholding requirement:
200% of salary for all Executive Directors
Key policy changes:
CFO annual bonus set at 150% of salary (from 125%).
CFO shareholding requirement increased to 430% of salary
(from 405%).
Pension aligned with wider workforce.
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Key principles of our remuneration strategy:
• Reward delivery of the Group’s strategy in a simple and transparent way that is aligned to
shareholder interests.
• Attract, retain and motivate senior executives with market-competitive reward.
• Align performance measures with shareholder returns with stretching targets aligned to
long-term value creation.
• Reflect and underpin the Group’s Purpose, our Values and wider stakeholder experience.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
104
Directors’ Remuneration Report continued
Remuneration arrangements for 2024
Salary/fees
Andrew Heath and Derek Harding will both receive a 3.0%
increase in salary for 2024 which is in line with the average
increase for Spectris employees.
With effect from 1 April 2024, the salaries for the Executive
Directors will be:
Andrew Heath – £772,500
Derek Harding – £546,250
The Chairman’s fee will increase to £350,000 with effect
from 1 April 2024. The basic fee for the Non-executive
Directors’ will increase in line with the average increase for
Spectris employees.
Further details of these increases are set out in the
statement from the Remuneration Committee Chairman
on pages 102 and 103.
Annual Bonus Plan
The maximum annual bonus opportunity for the Executive
Directors remains at 150% of salary.
Long Term Incentive Plan
The maximum LTIP opportunity for each of the Executive
Directors remains at 280% of salary.
The performance measures for the 2024 award are in line
with the 2023 Remuneration Policy and will be as follows:
The performance measures for the 2024 LTIP will be as
follows:
Like-for-like Sales Growth (30%)
Adjusted Operating Margin (30%)
Adjusted Cash Conversion (20%)
Strategic and Operational Objectives (20%)
Performance targets are not disclosed in advance due to
their commercial sensitivity. All targets will be disclosed
retrospectively following the end of the performance period.
Base Conditions
Condition
Weighting
Threshold (20%) Maximum (100%)
EPS growth
33.33%
4% p.a.
10% p.a.
ROGCE
Employee
engagement
33.33%
16.67%
14%
4.00
17%
4.08
16.67%
27.5%
35.5%
Scope 1 & 2
emission
reduction
Multiplier
Up to 1.4 x base award – Absolute TSR with Relative TSR
gateway
Absolute range:
0% (8% per annum) to 100% (15% per annum).
Relative TSR gateway:
A minimum of median relative TSR required for payout
between threshold (1x) and target (1.2x).
A minimum of upper quartile relative TSR required for
payout between target (1.2x) and maximum (1.4x)).
For full details on our Remuneration policy please visit
www.spectris.com/our-approach/corporate-governance/
Pension
The pension contribution for Andrew Heath and Derek
Harding for 2024 will remain at 10.5% of base salary which
aligns with the wider UK workforce.
All employee share plans
The Spectris Share Incentive Plan (SIP) partnership and
matching schemes will continue to be operated for 2024.
Both Executive Directors are members of the SIP.
Other benefits
No changes will be made to other benefits operated for
2024.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
105
22.1%
2.3%
31.3%
44.3%
Directors’ Remuneration Report continued
2023 Remuneration at a Glance
Business performance
A strong performance providing confidence in Spectris as a leading sustainable business. Key highlights
include:
• Strong like-for-like sales growth of 10%.
• Adjusted operating margin increased to 18.1%
• Adjusted operating profit increase of 18%
• Adjusted earnings per share up 25%
• Dividend per share increase of 5.0%, 34 years of consistent dividend growth
Performance outcomes
2023 Annual Bonus Plan
2021 LTIP
Total remuneration
1
1
Andrew Heath
£2,206,056 2021
£3,290,576
£1,404,337
2022: £3,674,110
2
3
Derek Harding
£1,574,756 2021:
£2,440,852
£800,940
2022: £2,682,185
2
3
4
4
Andrew Heath
1 Salary and benefits
2 Retirement benefits
3 Annual bonus
Derek Harding
22.8%
1 Salary and benefits
2.3%
2 Retirement benefits
32.7%
3 Annual bonus
Performance conditions
(% weighting)
Outcome
(% of maximum award)
Performance conditions
(% weighting of max award)
Outcome
(% of maximum award)
4 Long-term Incentives
42.2%
4 Long-term Incentives
Like-for-like sales growth (30%)
30.0/30
EPS (35.7%)
Adjusted operating profit (30%)
30.0/30
ROGCE (35.7%)
Adjusted cash conversion (20%)
20.0/20
TSR Multiplier (28.6%)
Strategic and operational (20%) –
Andrew Heath
Derek Harding
Total
Andrew Heath
Derek Harding
15.6/20
16.2/20
Total
95.6/100
96.2/100
Annual Bonus Plan outcome
LTIP outcome
Andrew Heath
Derek Harding
£1,075,500
Andrew Heath
£765,151
Derek Harding
Executive Directors’ shareholdings (% of salary)
35.7%
35.7%
0.0% (estimated)
final vesting to be
confirmed in March 2024
Outcomes scenarios
71.4%
Andrew Heath (£’000)
Derek Harding (£’000)
Estimated
vesting value
£1,387,040
£1,080,061
2,308
39%
24%
845
100% 37%
5,120
61%
4,070
51%
3,291
42%
3,625
61%
2,883
51%
2,441
44%
1,637
39%
28%
22%
33%
28%
22%
31%
21%
17%
25%
100% 37%
21%
17%
25%
603
24%
Basic
Target Maximum Maximum
Actual
growth*
Basic
Target Maximum Maximum
Actual
growth*
Andrew Heath
224%
290%
136%
* Maximum with 50% share price growth
Derek Harding
83%
300%
146%
Shares owned
Share awards no longer subject to performance conditions (net of tax)
2021 LTIP + 50% DBP part of 2023 Annual Bonus (2023 single total figure of remuneration (SFTR) values net of tax)
430% of salary
shareholding requirement
Key
Total fixed pay
Annual Bonus
LTIP/PSP
Each coloured bar shows the percentage of the total comprised by each of the parts
0
160
320
480
640
800
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
106
Directors’ Remuneration Report continued
Remuneration for 2023
This section of the Report sets out the details of the implementation of the 2023 Remuneration
Policy during the 2023 financial year. Details of how the Remuneration Committee intends to
implement the 2023 Remuneration Policy during 2024 are summarised on page 104. This part
of the Report together with the Remuneration Committee Chairman’s Statement, the 2023
Remuneration Policy structure and its implementation, and the information on the
Remuneration Committee form the Annual Report on Remuneration which is subject to an
advisory shareholder vote at the 2024 AGM and contains both unaudited and audited
information. The audited sections of this Report are clearly identified.
Executive Directors’ remuneration
Single total figure of remuneration (audited)
The single total figure of remuneration of each Executive Director who served during the year is
as follows:
£’000
A.
Base
salary
B.
Taxable
benefits
C.
Pension-
related
benefits1
Fixed
Pay and
benefits
(sub-total)
D.
Annual
Bonus2
F.
All-
employee
share plans
E.
LTIP3
Variable
remuneration
(sub-total)
Total
Andrew Heath 2023
734
2022
673
Derek Harding 2023
524
2022
501
17
16
17
16
77
135
55
75
828
824
596
592
1,076
1,387
808 2,043
765
1,080
498
1,591
–
–
–
–
2,463
3,291
2,851
3,675
1,845
2,441
2,089
2,681
1. With effect from 1 January 2023, the Executive Directors’ pension entitlement reduced to 10.5% of base salary in
line with the majority of the UK workforce.
2. In line with the 2023 Remuneration Policy, 50% of the bonus paid to Executive Directors is deferred in shares for
three years. These deferred share awards remain subject to continued employment conditions and malus/
clawback provisions although no further performance conditions are attached to them. Full details of the
nominal cost share options granted under the Deferred Bonus Plan (DBP) on 16 March 2023 can be found on
page 111 which satisfies the deferred element of the Executive Directors’ 2022 bonus entitlement.
3. A breakdown of how the LTIP values have been determined by year is shown below. Further details of the values
for 2022 and 2023 can be found on pages 109 and 111.
• The 2023 figures relate to the 2021 LTIP awards which are due to vest on 17 March 2024 and are based on
estimated vesting levels as at 31 December 2023. The value attributed to share price appreciation in respect of
the 2021 award (based on the three-month average share price at 31 December 2023 of 3,346.86 pence per
share) was £84,023 and £65,427 for Andrew Heath and Derek Harding respectively. This equates to 6% of the
total award vested for both Executive Directors.
• The 2022 figures have been restated to reflect the actual vesting outcomes for Andrew Heath’s and Derek
Harding’s 2020 LTIP award. The value attributed to share price appreciation in respect of the 2020 award
(based on a final share price at vesting of 3,497 pence per share) was £735,788 and £572,928 for Andrew Heath
and Derek Harding respectively. This equates to 36% of the total award vested for both Executive Directors.
Notes to the single total figure of remuneration table
A. Salary (audited)
Andrew Heath received a 9.2% and Derek Harding a 5.0% salary increase with effect from 1 April
2023. The average salary review increase for employees of Spectris plc in 2023 was 5.0%.
B. Taxable benefits (audited)
Taxable benefits include allowances paid in lieu of company cars and private fuel, medical
expenses insurance (including family cover) and life and disability cover.
Details of the taxable benefits paid in 2023 are set out in the table below:
Executive Director
Andrew Heath
Derek Harding
Car and fuel
allowances
£
Medical/
healthcare
cover
£
15,165
15,165
1,524
1,524
Total
£
16,689
16,689
C. Retirement benefits (audited)
Executive Directors are entitled to a defined contribution pension contribution.
With effect from 1 January 2023 and as stated in the 2023 Remuneration Policy, both Andrew
Heath and Derek Harding receive a 10.5% of base salary entitlement which aligns with the
terms applicable to the majority of the UK wider workforce. Prior to 2023, Andrew Heath and
Derek Harding received a pension entitlement of 20% and 15% of base salary respectively.
Due to the pension lifetime allowance and the maximum annual pension contribution
allowance, the Executive Directors are entitled, at their option, to a taxable salary supplement in
lieu of some or all of such pension contributions. Both Executive Directors have chosen this
option and each receives a cash payment in lieu of participation in a Spectris pension scheme.
No Executive Director participated in a defined benefit pension plan during the year.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 107
Bonus performance measures
The performance against the 2023 bonus financial metrics was as follows:
Bonus targets1
LFL sales growth2
Adjusted operating margin growth2
Adjusted cashflow conversion2
Threshold
(0% of max)
Target
(50% of max)
Maximum
(100% of max)
3.5%
17.0%
70%
6.0%
17.5%
80%
8.0%
18.0%
90%
Actual
10.1%
18.1%
103%
1. 2023 bonus targets and actual results are prepared and calculated on standard FX rates so that the bonus
outturn was not impacted (positively or negatively) by exchange rate movements during the bonus year.
2. LFL sales growth, adjusted operating margin growth and adjusted cashflow conversion are defined and
reconciled to the reported statutory measures. The definitions are provided in the appendix to the Consolidated
Financial Statements.
The Committee has not exercised any discretion in relation to the outcome of bonus awards to
the Executive Directors.
When reviewing performance against the financial metrics, the Committee considers whether
any items should be excluded because it gives a distorted view of performance.
For the 2023 bonus, the bonus targets reflect the disposal of Concept Life Sciences during the
year to ensure a fair like-for-like comparison with the actual results.
The Committee approved the maximum payout for the LFL sales growth, adjusted operating
margin growth and cash conversion metrics.
Directors’ Remuneration Report continued
Remuneration for 2023 continued
D. 2023 Annual bonus outcome (audited)
The maximum bonus opportunity for the Executive Directors is 150% of base salary. This is
unchanged for Andrew Heath, Chief Executive but has increased from 125% to 150% of base
salary for Derek Harding, Chief Financial Officer. The on-target bonus for each Executive
Director is 50% of the maximum bonus opportunity. The table below sets outs the annual
bonus earned by the Executive Directors in respect of the 2023 financial year including the
financial trigger points used in determining the level of bonus payable.
Maximum
bonus
opportunity
(% of salary)
150%
Andrew
Heath
(Salary –
£750,000)
150%
Derek
Harding
(Salary –
£530,250)
Bonus
performance
conditions
(% of
maximum
bonus
opportunity)
LFL sales
growth
(30%)
Adjusted
operating
margin
growth
(30%)
Adjusted
cashflow
conversion
(20%)
Strategic
objectives
(20%)
Total
LFL sales
growth
(30%)
Adjusted
operating
margin
growth
(30%)
Adjusted
cashflow
conversion
(20%)
Strategic
objectives
(20%)
Payout (% of salary)
Threshold
On-target Maximum
Actual Group
performance/
assessment
of personal
objective
performance
Bonus
outcome
(% of
maximum)
Payout1
£
0%
22.5%
45%
45.0% 337,500
30.0%
0%
22.5%
45%
45.0% 337,500
30.0%
0%
15%
30%
30.0% 225,000
20.0%
0%
15%
30%
23.4% 175,500
15.6%
0%
0%
75%
22.5%
150%
45%
143.4% 1,075,500
45.0%
238,613
95.6%
30.0%
0%
22.5%
45%
45.0%
238,612
30.0%
0%
15%
30%
30.0%
159,075
20.0%
0%
15%
30%
24.3%
128,051
16.2%
Total
0%
75%
150%
144.3%
765,151
96.2%
1. 50% of the Executive Directors’ 2023 bonus will be deferred into shares for three years in line with the 2023
Remuneration Policy.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 108
Directors’ Remuneration Report continued
Remuneration for 2023 continued
The 2023 operational and strategic objectives for the current Executive Directors, which were
set at the beginning of the year and account for 20% of the maximum bonus opportunity,
cover a range of the Company’s targeted strategic priorities. Each priority is assigned an
individual weighting and performance against each of the defined targets was assessed by the
Remuneration Committee with input from the Chairman. The objectives for both Executive
Directors and performance against them are summarised in the table below.
As outlined in last year’s Remuneration Report, and in line with the treatment of the wider
employee population, the Committee reviewed the Executive Directors’ performance against
the Group’s Values as part of the evaluation of the outcome of performance under the strategic
and operational objectives, considering not only what was achieved, but how it was achieved.
Derek Harding
• Operating
model
Weighting
%
24%
• Operating
model
16%
Andrew Heath
• Grow the
business
• Grow the
business
• Capital
allocation
Weighting
%
18%
Performance summary
In aggregate, all growth initiatives performing at, or above,
business case. Vitality index dropped due to the diversion of
engineers to address supply chain shortages in late 2022 and
higher sales of older products than expected.
%
achieved
10%
• Process
30%
transformation
18%
Strong and considered strategy agreed with the Board to
mitigate the Group’s exposure to geopolitical tensions.
16%
Successfully executed the divestment of Red Lion Controls.
18%
6%
Performance summary
Actively supported the improvement in performance
in the Spectris Dynamics Division, delivering
budgeted cost-reduction activity.
Introduced an improved financial performance
management process including a new, more detailed
P&L structure to enable more dynamic reporting of
the drivers of cost.
Oversaw the streamlining of the monthly business
review process.
Oversaw Project Legato, the project to implement the
Group’s ERP system in HBK and Malvern Panalytical,
delivering the project in accordance with the agreed
timeline.
Led the implementation of the new Group financial
consolidation reporting system.
Developed a plan to reduce IT operating costs.
Further progress on the population of M&A pipeline, but key
acquisition targets not secured due to external competition.
Deployed c£60 million of capital on acquisitions and
investments while maintaining discipline in line with the
Group’s capital allocation framework.
New organisation and operating model implemented.
Significant improvement in sales growth (up 10.8%).
Delivered an improvement in adjusted operating margin by
220bps.
Delivered a targeted programme to drive US share
ownership with strong progress made in strengthening
US-based share register.
• Dynamics
Division
performance
•
Investor
engagement
16%
16%
• Leadership
16%
Strengthened succession pipelines for the executive
management team.
Significant development of the gender diversity present in
the senior leadership community from 20% to 29% and the
establishment of the Group’s target to ensure 40% of senior
leadership roles are held by women by 2030.
Total
100%
1. This represent a bonus payment of 23.4% of salary (maximum 30%) for the strategic objectives part of Andrew
Heath’s 2023 annual bonus.
• Governance, risk
controls and
internal audit
10%
Significant progress on the implementation of a new
risk management system.
• Leadership
10%
• Diversity and
10%
16%
inclusion
Total
100%
Strengthened investor relations capability and
streamlined and improved effectiveness of Group
legal structure.
Championed work on developing Group approach to
diversity and inclusion.
1. This represent a bonus payment of 24.3% of salary (maximum 30%) for the strategic objectives part of Derek
Harding’s 2023 annual bonus.
15%
13%
78%1
%
achieved
21%
9%
22%
9%
10%
10%
81%
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 109
Directors’ Remuneration Report continued
Remuneration for 2023 continued
E. Long Term Incentive Plan (LTIP)
(audited)
Awards granted under the LTIP to the
Executive Directors between 2020 to 2022
were structured so that 50% of the base
award was subject to a Group EPS target,
and the remaining 50% to a ROGCE target.
A multiplier (up to a maximum of 1.4 times)
can potentially be applied to the base award
vesting but only on achieving stretching
absolute and relative Total Shareholder return
(TSR) targets.
Each condition operated over a fixed
three-year period (being the three financial
years commencing with the financial year in
which an award was made in respect of the
Group EPS and ROGCE measures; and three
years from the date of grant in respect of the
absolute and relative TSR measures) with
no opportunity for re-testing. The TSR
performance condition is measured
independently by Aon Hewitt (Aon). A holding
period of two years applies to all awards
following vesting.
F: All-employee share plans (audited)
There were no payments during the year
to Executive Directors under the Spectris
all-employee share plans.
Payments for loss of office (audited)
There were no payments for loss of office
in 2023.
Payments to past Directors (audited)
There were no payments to past Directors
in 2023.
LTIP awards vested in March 2023 (audited)
The 2020 LTIP awards granted to Andrew Heath and Derek Harding matured in March 2023. 71.5% of the total award vested on 25 March 2023
(see table below) and is now subject to the additional two-year holding period. The balance of the award lapsed.
Performance
condition
EPS
ROGCE
Award level
(% of salary)
100%
100%
Threshold
(20%)
4% p.a.
Maximum
(100%)
10% p.a.
13.7%
(2019 ROGCE +1%)
15.7%
(2019 ROGCE+3%)
TSR multiplier
80%
(Up to 1.4X multiplier)
Multiplier
Absolute TSR
Relative
TSR gateway
1.0X
8% p.a. or less
Median or above
1.0X to 1.2X
8% –10% p.a.
1.2X
10% p.a.
1.2X to 1.4X
10% – 15% p.a. Upper quartile or above
1.4X
15% p.a.
Total
280%
Actual
Percentage weighted
vesting
Percentage of total
vested award
81.9%
100.0%
22.7%
(1.10 X multiplier)
8.64% p.a.
16.0%
TSR
Actual
Absolute:
9.0% p.a.
Relative:
Above
upper
quartile
29.3%
35.7%
6.5%
71.5%
The 2022 single total figure of remuneration for Andrew Heath and Derek Harding has been restated as shown below to reflect the final vesting
outcome.
Executive Director
Andrew Heath
Derek Harding
Total number
of shares subject
to LTIP option at
date of grant
Face value
at date
of grant1
Vesting
percentage of
total award
Vested
award
Reinvested
dividend
shares
Total
Vested
Award
Share price on
vesting date
(25 March 2023)
Vesting
value
76,276
£1,707,972
71.5%
54,510
3,988
58,498
3,497p £2,042,950
59,395
£1,329,973
71.5% 42,445
3,105
45,550
3,497p
£1,590,761
Share price
appreciation as
a % of the total
vested award value
36%2
36%2
1. The face value is based on the average of the closing share price over the five days immediately prior to the date of grant of 2,239.2 pence.
2. The value attributed to share price appreciation, based on a final share price at vesting of 3,497 pence per share, was £735,788 and £572,928 for Andrew Heath and Derek
Harding respectively. The Committee determined that the 71.5% partial vesting position together with the share price appreciation provided an appropriate level of award
fairly representing how the Company had performed over the 2020 LTIP’s vesting period.
On vesting, the Committee gave appropriate consideration to the possibility of a windfall gain in respect of the 2020 LTIP, which was granted
when the share price was subject to significant market volatility at the start of the COVID-19 pandemic. After meaningful deliberation, the
Committee concluded that a discretionary adjustment to the 2020 LTIP was not appropriate.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
110
Directors’ Remuneration Report continued
Remuneration for 2023 continued
LTIP awards vesting in March 2024 (audited)
Both Andrew Heath and Derek Harding were granted LTIP awards in 2021, which will mature in
March 2024. The Committee determined that the 2021 LTIP vesting outcome has not been
subject to windfall gains.
The final vesting position of the EPS and ROGCE conditions as well as the best estimate of the
vesting position for the TSR Multiplier (based on Aon’s interim report as at 31 December 2023)
are provided below:
Performance
condition
Award
level
(% of salary)
EPS
ROGCE
100%
100%
Threshold
(20%)
4% p.a.
Maximum
(100%)
Actual
10% p.a.
26.5% p.a.1
10.9%
(2020 ROGCE +1%)
12.9%
(2020 ROGCE+3%)
18.5%2
TSR
multiplier
80%
(Up to 1.4X
multiplier)
Multiplier Absolute TSR
Relative
TSR gateway
Estimated
TSR
Actual/
estimated
percentage
vesting
Actual/
estimated
percentage of
total vested
award
100.0%
100.0%
35.7%
35.7%
1.0X 8% p.a. or less
1.0X to 1.2X
8% –10% p.a.
Median or
above
1.2X
10% p.a.
1.2X to 1.4X
10% – 15% p.a. Upper quartile
or above
1.4X
15% p.a.
Absolute:
6.2% p.a.
Relative:
Above
upper
quartile3
0.0%
(1.0X multiplier)
0.0%
Total
280%
Estimated total vesting
71.4%
1. The EPS outcome figure has been calculated on the following basis:
•
•
In order to account for material business divestments which occurred with more than one year remaining of the
performance period of the 2021 LTIP (namely the Millbrook, BK Vibro, ESG, NDCT and Omega disposals), the base
performance condition and outcomes have been adjusted to remove the impact of the disposed entities.
In order to account for material business divestments which occurred with less than one year remaining of the
performance period of the 2021 LTIP (namely the Concept Life Sciences disposal), no changes have been
made to the base calculation, but the final outturn has been adjusted to reflect a full year’s contribution from
the divested business.
• These adjustments ensure that the targets remained as stretching as originally intended and the outcomes
are not influenced by the impact of divestments that occurred during the performance period.
• This approach was agreed by the Committee in December 2019, and has been applied consistently to date. A
full reconciliation of this outcome from the Adjusted EPS figure (as set out in the appendix to the Consolidated
Financial Statements on page 188) is provided below:
Adjusted EPS (reported)
Adjustments relating to disposals (Millbrook, BK Vibro, ESG, NDCT and Omega)
Adjustments relating to disposal of Concept Life Sciences
Adjusted EPS (excluding disposals)
Compound annual growth in EPS
As at
31 December
2020
pence
As at
31 December
2023
pence
112.1p
(12.7p)
99.4p
199.7p
1.4p
201.1p
26.5%
2. The Committee determined that the 2023 ROGCE outcome as calculated below is a true reflection of the
Company’s performance:
Average gross capital employed (reported)
Adjusted operating profit (reported)
ROGCE
31 December
2023
£m
1,419.2
262.5
18.5%
3. TSR performance, both absolute and relative to the FTSE 250 (excluding investment trusts), has been estimated
based on the position as at 31 December 2023.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Directors’ Remuneration Report continued
Remuneration for 2023 continued
The vesting estimates as at 31 December 2023 are detailed in the table below:
Maximum
vesting
opportunity
under LTIP
option1
Face
value of
maximum
LTIP
award2
Estimated
vesting % of
maximum
award
Estimated
number of
shares
vesting
Estimated
reinvested
dividend
shares3
Estimated
total
number of
shares
vesting
Year-end
three-
month
average
share price
Estimated
vesting
value
Estimated
share price
appreciation
as a % of
vested
value4
54,318 £1,707,975
71.4%
38,799
2,702
41,501 3,346.86p 1,387,040
42,296 £1,329,955
71.4%
30,212
2,104
32,316 3,346.86p 1,080,061
6%
6%
Executive
Director
Andrew
Heath
Derek
Harding
1. The maximum vesting opportunity under the LTIP award equals the base award times a 1.4 TSR multiplier.
2. The face value is based on the average closing share price over the five days immediately prior to the date of
grant (17 March 2021) of 3,144.4 pence.
3. The estimated dividend shares are based on dividends paid over the three-year performance period. Dividend
shares will accrue from date of grant to the end of the holding period (fifth year anniversary from date of grant)
which is the first opportunity the award can be exercised.
4. The estimated value attributed to share price appreciation, based on the three-month average share price at
31 December 2023 of 3,346.86 pence per share, was £84,023 and £65,427 for Andrew Heath and Derek Harding
respectively. These values are only estimates, however, the Committee has determined that no discretionary
adjustment will be made to the final LTIP vesting position.
Vested awards are satisfied in shares (normally treasury shares) with sufficient shares being
sold to meet income tax and national insurance contributions due on exercise, at the Director’s
discretion, and the net balance of shares transferred to the individual. Awards lapse if they do
not vest on the third anniversary of their award.
111
Deferred Bonus Plan (DBP) awards granted during 2023 (audited)
50% of each Executive Director’s pre-tax annual bonus is compulsorily deferred under the
terms of the DBP in the form of a nominal cost share option grant. The DBP share options
remain subject to continued employment conditions as well as malus and clawback provisions
although no further performance conditions apply.
The DBP share options granted to the Executive Directors on 16 March 2023, based on their
2022 Bonus entitlement and calculated according to the average of the closing share price over
the five days immediately prior to the date of grant, are summarised in the table below:
Director
Andrew Heath
Derek Harding
Exercise price
Number of shares under
DBP share option
Face value of DBP share
option at date of grant1
5p
5p
11,666
7,201
£403,737
£249,212
1. The face value is based on the average closing share price over the five days immediately prior to date of grant
(16 March 2023) of £3,460.8 pence.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 112
Directors’ Remuneration Report continued
Remuneration for 2023 continued
LTIP awards granted during 2023 (audited)
The 2023 LTIP awards to Andrew Heath and Derek Harding were granted on 16 March 2023 and are subject to the performance conditions detailed below.
An additional vesting period of two years applies to all awards following the three-year performance period.
Director
Andrew Heath
Derek Harding
Exercise
price
5p
5p
Number of shares under
base award (% of salary)
Face value of base
award at date of grant1
(£)
Maximum
TSR
multiplier
TSR multiplier 0.4x maximum
additional share opportunity
(shares)
Maximum opportunity
base award +
TSR multiplier (shares)
Face value of maximum
award at date of grant1
(£)
39,701
(200% of salary)
29,184
(200% of salary)
£1,373,972
£1,010,000
1.40 x
base award
15,880
(80% of salary)
11,673
(80% of salary)
=
55,581
(280% of salary)
40,857
(280% of salary)
£1,923,547
£1,413,979
2023 LTIP base award performance conditions
2023 LTIP TSR multiplier performance conditions
Vesting (% of base award)
Performance targets
Performance period
TSR multiplier
Absolute TSR
growth targets
Relative TSR gateway –assessed against FTSE
250 index (excluding investment trusts)
Performance
period
Adjusted EPS
Growth
(33.33% of
base award)
0%
6.7%
6.7% to 33.3%
(straight line pro-rata basis)
33.3%
0%
6.7%
6.7% to 33.3%
(straight line pro-rata basis)
33.3%
0%
3.3%
3.3% to 16.7%
(straight line pro-rata basis)
16.7%
0%
3.3%
3.3% to 16.7%
(straight line pro-rata basis)
ROGCE
(33.33% of
base award)
Net Zero
emissions
(16.67% of
base award)
Gallup employee
engagement
(16.67% of
base award
Less than 4%
4%
Between
4% and 10%
10% or more
Less than 14% p.a.
14% p.a.
Between 14% p.a.
and 17% p.a.
17% p.a. or more
1 January 2023
to
31 December 2025
1 January 2023
to
31 December 2025
Less than 27.5% reduction
27.5% reduction
Between 27.5% and
35.5% reduction
1 January 2023
to
31 December 2025
35.5% reduction or more
Gallup score of 3.94 or less
Gallup score of 3.94
Gallup score between
3.94 and 4.06
1 January 2023
to
31 December 2025
1. Face value of base and maximum award based on the average of the closing share price over five days
immediately prior to date of grant – £34.608.
16.7%
Gallup score of 4.06 or more
1.00 X
8% p.a. or less
Between
1.00 X and 1.20 X
1.20 X
Between
1.20 X and 1.40 X
1.40 X
Between
8% and 10% p.a.
10% p.a.
Between
10% and 15% p.a.
15% p.a. or more
Median
or above
16 March 2023
to
15 March 2026
Upper quartile
or above
The above table details LTIP share options granted to Executive Directors during 2023, in line with
the 2023 Remuneration Policy. The base level of award is 200% of base salary, calculated according
to the average of the closing share price over the five days immediately prior to the date of grant.
A multiplier (up to a maximum of 1.4 times) will apply to the base award vesting level but only on
achieving both absolute and relative stretching TSR targets.
The EPS figure is obtained from the audited Consolidated Financial Statements and the calculation
of achievement against growth condition is presented to and approved by the Committee. ROGCE
is a comprehensive measure of the effectiveness of all capital deployed by the Group and
supports the Group’s key strategic intention to improve its overall return on capital invested in the
medium-term.
The Net Zero emissions condition is aligned to the Company’s Net Zero roadmap to 2030 and a key
driver for sustainable growth. Improving employee engagement score is key to unlocking
workforce productivity, which in turn supports our ability to retain and attract the talent we need to
execute the strategy successfully and drive value for all of our stakeholders.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 113
Directors’ Remuneration Report continued
Remuneration for 2023 continued
The Committee will monitor outcomes for the LTIP performance conditions to ensure that they achieve the original objectives and may adjust the vesting accordingly.
Any exercise of discretion will be justified in the relevant Directors’ Remuneration Report.
The multiplier condition requires the achievement of both relative and absolute TSR metrics which means that any additional payout from the multiplier would only
occur when shareholders benefit from a material increase in share value which outperforms the FTSE 250 comparator group.
Threshold and maximum vesting (as a % of the 2023 LTIP base award)
Performance Level
EPS Vesting
ROGCE Vesting
Net Zero Vesting
Employee
Engagement Vesting
Base award Vesting
TSR Multiplier factor
Threshold
Maximum
6.7% +
33.3% +
6.7% +
33.3% +
3.3% +
16.7% +
3.3% =
16.7% =
20%
100%
x
x
1.0
1.4
=
=
Overall Vesting (as
% of base award)
20%
140%
Total shareholder return performance
)
d
e
s
a
b
e
r
(
)
£
(
e
u
a
V
l
250
200
150
100
50
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
Dec-23
Spectris
FTSE 250 (excluding investment trusts)
Source: FactSet
This graph shows the value, by 31 December 2023, of £100 invested in Spectris on 31 December 2013, compared with the value of £100 invested in the FTSE 250
(excluding investment trusts) on the same date. This index has been chosen because it is a widely recognised performance benchmark for large UK companies
and Spectris is a constituent of the FTSE 250. The other points plotted are the values at intervening financial year ends.
Historical Chief Executive remuneration
The table below shows the total remuneration figure for the Chief Executive for the current year and over the previous nine years. The total remuneration figure
includes the annual bonus and LTIP awards that vested based on performance in those years. The annual bonus and LTIP percentages show the payout for each
year as a percentage of the potential maximum.
2014
2015
2016
2017
2018
2018
2019
2020
2021
2022
2023
John
O’Higgins
John
O’Higgins
John
O’Higgins
John
O’Higgins
John
O’Higgins
Andrew
Heath
Andrew
Heath
Andrew
Heath
Andrew
Heath
Single total figure of remuneration (£’000)
Annual bonus (% of maximum)
PSP/LTIP vesting (% of maximum)
1,122
18%
28%
729
0%1
0%
1,388
90%
0%
1,611
80%
10%
2,2532
54%
68%
3242
60%
N/A
1,163
45%
N/A
1,404
40%
31%
2,010
98%
25%
Andrew
Heath
3,6753
78%
71%3
Andrew
Heath
3,2914
96%
71%4
1. Bonus entitlement waived.
2. Pro-rated figures based on time served as Chief Executive during 2018 (nine months for John O’Higgins and three months for Andrew Heath).
3. Restated figure to reflect actual vesting of 2020 LTIP award.
4. Based on estimated vesting for 2021 LTIP award.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
114
Directors’ Remuneration Report continued
Remuneration for 2023 continued
Percentage change in remuneration of the Directors
The table below shows the percentage change in the salary/fees, and benefits of each Executive Director, the Chairman and the Non-executive Directors
compared with the change in the Group’s employees between the year ended 31 December 2022 and 31 December 2023. The Group-wide 2023 annual bonus
payments will be confirmed in March 2024 and therefore estimated figures for Group employees have been used in the comparison.
Executive Directors
Andrew Heath
Derek Harding
Chairman and Non-executive Directors
Mark Williamson
Ravi Gopinath
Mandy Gradden
Alison Henwood
Ulf Quellmann
Bill Seeger
Cathy Turner
Kjersti Wiklund
Spectris employees4
% change 2022–2023
% change 2021–2022
% change 2020–2021
Salary/fees1
Benefits Annual bonus2
Salary/fees
Benefits
Annual bonus
Salary/fees
Benefits Annual bonus
9.2%
5.0%
4.6%
4.3%
n/a
5.4%
4.3%
(5.8%)3
23.4%3
4.5%
6.8%
1.6%
1.6%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
33.2%
53.5%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
9.1%
3.0%
3.0%
2.4%
n/a
3.0%
2.4%
1.8%
2.4%
2.5%
(3.6%)
(3.6%)
(12.7%)
(16.7%)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
13.5%
27.1%
6.6%4
14.9%4
(2.6%)4
3.2%
3.2%
5.5%
n/a
n/a
n/a
4.3%
7.8%
10.8%
11.1%
7.0%
(0.5%)
(0.5%)
152.8%
151.8%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0.3%
120.3%
1. The change in the Executive Directors’ salaries plus the Chairman and Non-executive Directors’ fees reflects the increases disclosed in the 2022 Remuneration Report. The Chief Executive’s 9.2%
pay increase was the second part of a two-year structured increase to bring his salary to the median position for the FTSE 50 – 150 peer group.
2. The financial metrics were fully met for the 2023 bonus, whereas they were partially met for the 2022 comparative. The greater percentage increase in Andrew Heath’s and Derek Harding’s
bonus compared to the average Spectris employee reflects that when the financial metrics are only partially met a greater portion of the Executive Directors’ bonus opportunity is missed than
is the case for the average Spectris employee. The 2022-23 percentage change in annual bonus was greater for Derek Harding, compared to Andrew Heath, because his maximum bonus
opportunity increased from 125% to 150% of salary.
3. On 26 May 2023, Cathy Turner took over from Bill Seeger as Senior Independent Director as part of a planned succession process. This is the reason for the reduction in Bill Seeger’s fee and the
substantial increase in Cathy Turner’s fee compared to 2022 levels.
4. The percentage change figures for Spectris employees has been restated to include all Spectris Group employees. Previously these figures only related to UK Spectris Group employees.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
115
Directors’ Remuneration Report continued
Remuneration for 2023 continued
CEO pay ratios
The table below sets out the 2019, 2020, 2021 2022 and 2023 pay ratios of the Chief Executive’s
total remuneration to the 25th, median (50th), and 75th percentile full-time equivalent (FTE)
remuneration of Group UK employees.
Financial year
Method
31 December 2019
Option A
31 December 2020
Option A
31 December 2021
Option A
31 December 20221
Option A
31 December 2023
Option A
25th percentile pay ratio
(lower quartile)
50th percentile pay ratio
(median)
75th percentile pay ratio
(upper quartile)
40:1
47:1
64:1
109:1
86:1
30:1
36:1
45:1
79:1
60:1
21:1
25:1
32:1
55:1
41:1
1. Restated figures to reflect actual vesting of 2020 LTIP award.
Further details on the 2023 total pay figures used for each quartile employee are set out in the
table and notes below.
Financial year
31 December
2023
No. of UK
employees Remuneration
Chief
Executive
1,027
Base salary
£734,250
25th percentile
employee
(lower quartile)
50th percentile
employee
(median)
75th percentile
employee
(upper quartile)
£32,740
FTE base salary
£46,688
FTE base salary
£64,922
FTE base salary
Total
remuneration
£3,290,576
STFR
£38,360
total FTE
£54,669
total FTE
£79,518
total FTE
1. The components of the Chief Executive and UK employees’ STFR figure comprises base salary, taxable benefits,
pension-related benefits, annual bonus and LTIPs, where applicable.
2. The total remuneration for UK employees is calculated on the same basis as the STFR for Executive Directors. The
only exception to this is the personal element of the annual bonus for UK employees which is not known as at the
date of this report. Bonus estimations are based on the same performance level as the Chief Executive. Given the
complexity of the calculations, such estimated values will not be restated next year to reflect the actual
outcomes.
The Chief Executive’s total remuneration as calculated is reported in the table on page 106. The
remuneration of the lower, median and upper quartile employees is calculated on FTE data for
the full year, run on 30 November, with estimated figures for the annual bonus and LTIP vesting.
Option A methodology was chosen as it is considered to be the most statistically accurate way to
identify the best equivalents of the 25th, median and 75th percentile figures used to calculate
the pay ratios each year, and it is aligned with best practice and investor expectations. The
Committee is satisfied that the individuals identified within each relevant percentile
appropriately reflect the employee pay profiles at those quartiles, and that the overall picture
presented by the ratios is consistent with our pay, reward and progression policies for UK
employees. Roles are regularly benchmarked against PwC’s benchmarking report of FTSE
50–150 companies.
The reduction in this year’s pay ratio compared to 2022 levels is predominantly the result of the
Chief Executive’s 2022 LTIP value which was 47.3% higher than his estimated 2023 LTIP value.
Consequently there has been a 10.4% reduction in the Chief Executive’s 2023 STFR on last year.
In comparison, the lower quartile, median and upper quartile of the Group UK employees’
SFTR compared to 2022 is higher by 13.8%, 17.7% and 20.0% respectively.
The Chief Executive’s 2023 remuneration (excluding LTIP values) is 16.7% higher than it was in
2022 which aligns with similar equivalent percentage increases for the lower quartile, median
and upper quartile of Group UK employees of 13.8%, 18.0% and 19.4%. The Chief Executive’s 2023
remuneration (excluding LTIP values) has increased due to the 9% pay increase and near
maximum bonus payout although these increases are partially offset by a reduction in his
pension cash allowance to 10.5% of salary to align with the majority of the UK workforce. For
Group UK employees, the average increase in salary and bonus payout were lower than the
Chief Executive, however their benefits increased with the change in pension entitlements.
Overall the reduction in the CEO pay ratio reflects the greater volatility in the Chief Executive’s
STFR which has a greater emphasis on variable remuneration to ensure his pay reflects the
Group’s performance and is better aligned with shareholder interests.
The reward policies and practices for our employees broadly follow those set for the Executive
Directors, including the Chief Executive. The Committee has responsibility for setting and
making any changes in remuneration for the senior management. This includes the reviewing of
policies and practices for our workforce and consideration of shareholders and other stakeholder
views as part of designing the Remuneration Policy and its operation for the Executive Directors.
On this basis, the Committee is satisfied that the median pay ratio is consistent with the pay,
reward and progression policies across all of the Company’s employees.
Relative importance of spend on pay
The table below shows the relative expenditure of the Group on the pay of its employees in
comparison to adjusted profit before tax and distributions to shareholders by way of dividend
payments between the years ended 31 December 2022 and 31 December 2023. Total employee
pay is the total pay cost for all Group employees. Adjusted profit before tax is used as this is a key
financial metric which the Board considers when assessing the Group’s financial performance.
Total employees pay
Dividends paid during the year1
Share buyback during the year
Adjusted profit before tax2
2023
£m
569.2
79.7
114.9
263.6
2022
£m
514.0
78.6
191.0
219.7
% change
10.7%
1.4%
(39.8%)
20.0%
1. The dividend per share during the year increased by 5.1% however the dividends paid during the year only
increased by 1.4% because of the reduction in the Company’s Issued Share Capital caused by the share buyback
programme.
2. Adjusted profit before tax is calculated as being statutory profit before tax adjusted to exclude certain items
defined in the appendix to the Consolidated Financial Statements on page 188.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 116
Directors’ Remuneration Report continued
Remuneration for 2023 continued
Non-executive Directors’ remuneration
Chairman and Non-executive Directors’ fees
The fee structure for the Non-executive Directors is set out below:
Chairman (all-inclusive fee)
Non-executive Director basic fee
Senior Independent Director (SID) fee
Chairman of the Audit and Risk Committee
Chairman of the Remuneration Committee
Workforce Engagement Director
Non-executive responsible for sustainability oversight
Annual travel supplement to be paid to overseas-based Non-executive Directors
20241
£’000
2023
£’000
2022
£’000
350
65
15
17
17
12
12
15
250
63
13
15
15
12
–
15
239
60
10
14
14
12
–
15
1. A fee review to take effect from 1 April 2024 was undertaken against externally available market data on
Non-executive fee structures in the FTSE 50-150, the wider Group pay review process and the Group’s position in
the FTSE 50-150 peer group. The Chairman’s fee will increase to £350,000 to align more closely with the market
levels expected for our peer group. Further details explaining the rationale for this fee increase can be found on
page 103. The Non-executive Directors’ basic fee will increase in line with the average salary review for Spectris plc
employees.
Single total figure of remuneration (audited)
The single total figure of remuneration for each Non-executive Director who served during the
year is as follows:
Basic fees
£’000
Additional fees
£’000
Taxable
expenses
£’000
Mark Williamson1
Non-executive Chairman
Ravi Gopinath2
Mandy Gradden3
Alison Henwood
Ulf Quellmann2
Bill Seeger2,4
Chairman – Audit and Risk
SID (until May 2023)
Cathy Turner4
Chairman – Remuneration
SID (from May 2023)
Kjersti Wiklund
Workforce Engagement Director
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
247
237
62
59
13
–
62
59
62
59
62
59
62
59
62
59
–
–
15
15
–
–
–
–
15
15
34
38
23
14
12
12
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£’000
247
237
77
74
13
–
62
59
77
74
96
97
85
73
74
71
1. Mark Williamson’s fee is all-inclusive.
2. Ravi Gopinath, Ulf Quellmann and Bill Seeger all receive an additional annual travel supplement of £15,000. The
travel supplement was not paid during the COVID-19 pandemic from April 2020 until impacted directors were
required to travel for their roles. For Bill Seeger, his annual travel supplement was not reinstated until February
2022 so his 2022 fees reflect a pro-rated annual travel supplement for that year.
3. Mandy Gradden joined the Board on 16 October 2023. Her 2023 fees are pro-rated to reflect her date of joining.
4. On 26 May 2023, Cathy Turner took over from Bill Seeger as SID as part of a planned succession process. Their
2023 fees include a pro-rated SID fee.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
117
Directors’ shareholding in the SIP
No. of shares held
at 1 January 2023
No. of Partnership
shares purchased
during the year
No. of Matching
shares awarded
during the year
Dividend
shares
Total no. of shares held
within the SIP as at
31 December 2023
Andrew Heath
Derek Harding
345
296
53
53
11
10
9
7
418
366
The SIP was approved by shareholders at the 2018 AGM. This scheme is an HMRC tax favoured
share purchase scheme open to all UK employees. The Executive Directors have the
opportunity to participate in the SIP on the same terms as other Group UK employees. Under
the SIP, Partnership shares may be purchased each month at market value using gross salary
up to a maximum monthly value set by HMRC (currently £150 per month). For every five
Partnership shares purchased, the Company will award one free Matching share. All shares are
held in trust by the SIP Trustees. The Matching shares are subject to forfeiture within three years
of the date of award.
Between 1 January and 28 February 2024, Andrew Heath and Derek Harding both purchased
eight Partnership shares with Andrew Heath and Derek Harding receiving one and two free
Matching shares respectively through the Company’s SIP. There were no other movements in
share interests during this period.
Directors’ Remuneration Report continued
Remuneration for 2023 continued
Directors’ shareholdings and share interests (audited)
Each Executive Director is, subject to personal circumstances, required to build a retained
shareholding in Spectris plc of at least one-year maximum variable pay in value (430% of salary)
within five years of appointment and is required to retain shares with the post-tax benefit of
any vested PSP, LTIP or DBP awards until this shareholding requirement is achieved. Andrew
Heath has met this shareholding requirement and it is anticipated that Derek Harding
(appointed in March 2019) will achieve the shareholding requirement in March 2024.
There is no such requirement in respect of the Chairman or Non-executive Directors, who have
discretion as to whether to hold the Company’s shares or not.
The beneficial share interest of each Executive Director (including their closely associated
persons) on 31 December 2023, is:
Interest in share plans
Ordinary
shares
held on
31 December
2023
LTIP1
(subject to
performance
conditions)
LTIP/PSP/
DBP2
(not subject to
performance
conditions)
Total
Interests
in shares on
31 December
2023
Total shares
counting
towards
shareholding
requirement4
Shareholding
as a % of base
salary on
31 December
20235
SIP
shares3
Shareholding
requirement
met
44,057
176,212
107,701
418
328,388
102,000
513.9%
11,234
134,790
78,921
366
225,311
53,680
382.6%
Yes
No
Director
Andrew
Heath
Derek
Harding
1. These LTIP awards are all nominal cost share options of 5 pence and all currently have outstanding performance
conditions attached to them.
2. These LTIP, PSP and DBP awards are all nominal cost share options of 5 pence but are no longer subject to
performance conditions. The LTIP/PSP awards are post the application of the respective performance conditions
but are now subject to an additional two-year vesting period.
3. Includes Partnership shares purchased through, and Matching shares held in, the Company’s all-employee Share
Incentive Plan (SIP). The Matching shares may be subject to forfeiture within three years of the award. As at 31
December 2023, Andrew Heath and Derek Harding held 34 and 33 Matching shares respectively, which were still
subject to forfeiture rules.
4. This is based on shareholding plus the net of UK income tax and NI contribution value of share options held
without performance conditions (see below):
• Andrew Heath’s balance includes 72,809 vested LTIP/PSP share options that are currently subject to an
additional two-year vesting period and 34,892 unvested DBP share options with no performance conditions
attached. Net of UK income tax and NI contributions, these represent 38,348 and 19,177 shares respectively;
and
• Derek Harding’s balance includes 56,695 vested LTIP/PSP share options that are currently subject to an
additional two-year vesting period and 22,226 unvested DBP share options with no performance conditions
attached. Net of UK income tax and NI contributions, these represent 29,862 and 12,218 shares respectively.
5. Based on the closing price on 31 December 2023 of 3,779 pence per share.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 118
Directors’ Remuneration Report continued
Remuneration for 2023 continued
Directors’ share options (audited)
Share
plan1
Date
granted
Performance
period end
date
Expiry
date
Exercise
price
(pence)
PSP2,5
Sept 2018
Sept 2021
Sept 2028
Director
Andrew
Heath
Mar 2019
LTIP3,5 Mar 2020
Mar 2021
Mar 2022
Mar 2023
DBP4
Mar 2021
Mar 2022
Mar 2023
Derek
Harding
PSP2,5 Mar 2019
LTIP3,5 Mar 2020
Mar 2021
Mar 2022
Mar 2023
DBP4
Mar 2021
Mar 2022
Mar 2023
Mar 2022
Mar 2023
Mar 2024
Mar 2025
Mar 2026
Mar 2024
Mar 2025
Mar 2026
Mar 2022
Mar 2023
Mar 2024
Mar 2025
Mar 2026
Mar 2024
Mar 2025
Mar 2026
Mar 2029
Mar 2030
Mar 2031
Mar 2032
Mar 2033
Mar 2031
Mar 2032
Mar 2033
Mar 2029
Mar 2030
Mar 2031
Mar 2032
Mar 2033
Mar 2031
Mar 2032
Mar 2033
Market
value per
share at
date of
award
Face value
at date of
grant (£)
No. of
shares
subject to
options at
1 January
2023
2,378.4
508,312
7,4036
2,669.0
1,220,000
2,239.2
3,144.4
1,707,972
1,707,975
2,658.0
1,762,600
12,780
76,276
54,318
66,3136
Granted
during
the year
1007
2757
5,2447
–
–
3,460.8
1,923,547
–
55,581
3,144.4
2,658.0
3,460.8
2,669.0
2,239.2
3,144.4
2,658.0
182,973
462,678
403,757
5,819
17,407
–
Total
240,316
949,977
1,329,973
1,329,955
1,372,511
9,9526
59,395
42,296
51,6376
–
–
11,666
72,866
2147
4,0847
–
–
3,460.8
1,413,979
–
40,857
3,144.4
2,658.0
3,460.8
118,733
298,998
249,212
3,776
11,249
–
Total
178,305
–
–
7,201
52,356
No. of
shares
subject to
options at
31 December
2023
–
13,055
59,754
54,318
66,313
55,581
5,819
17,407
11,666
Lapsed
during
the year
–
–
21,766
–
–
–
–
–
–
Exercised
during
the year
7,503
–
–
–
–
–
–
–
–
7,503
21,766
283,913
–
–
–
–
–
–
–
–
–
–
16,950
–
–
–
–
–
–
10,166
46,529
42,296
51,637
40,857
3,776
11,249
7,201
16,950
213,711
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
1. Shareholders approved the current PSP rules at the AGM held on 24 May 2017 and approved the LTIP and DBP rules at the General Meeting held on 4 December 2019. The PSP, LTIP and DBP
awards are conditional rights to acquire shares and are nominal cost options. The exercise price is the nominal value of a Spectris ordinary share, which is 5 pence.
2. PSP awards granted to the Executive Directors were structured so that one-third of the award is subject to an EPS target, one-third is subject to a TSR target and one-third is subject to an
Economic Profit (EP) target. Each condition operated over a fixed three-year period (being the three financial years commencing with the financial year in which an award was made in respect
of the EPS and EP conditions; and three years from the date of grant in respect of the TSR condition) with no opportunity for re-testing.
3. LTIP awards granted to the Executive Directors are currently structured so that one-third of the base award is subject to an EPS target, one third is subject to a ROGCE target and the final third is
subject to an economic, social and governance (ESG) target. Prior to the 2023 grant, the base award was 50% subject to the EPS target and 50% subject to the ROGCE target. A multiplier (up to a
maximum of 1.4 times) will apply to the base award vesting level but only on achieving both absolute and relative stretching TSR targets. Each condition operates over a fixed three-year period
(being the three financial years commencing with the financial year in which an award is made in respect of the EPS, ROGCE and ESG conditions; and three years from the date of grant in
respect of the TSR condition) with no opportunity for retesting.
4 DBP awards represent the 50% of each Executive Director’s pre-tax annual bonus that is compulsorily deferred into shares. No further performance conditions apply to these DBP awards.
5. PSP and LTIP awards are subject to an additional two-year holding period following the initial three-year performance period. These awards will become available to exercise at the end of the
holding period (which will be the fifth anniversary of the date of grant).
6. These PSP and LTIP awards are linked to a grant of market value share options (Linked Awards). Such Linked Awards are granted up to the applicable HMRC’s limit as at the date of grant
(£30,000 for these awards), and have the same performance and vesting conditions as the PSP and LTIP awards to which they are linked. No additional gross value can be delivered from the
exercise of the Linked Awards. Further details are set out in note 22 to the Consolidated Financial Statements.
7. These are additional share awards for the dividend equivalent shares that would be received on the vested share award between the date of grant and the date the award becomes exercisable.
These additional dividend share awards are structured as nil cost options (i.e. exercise price is nil).
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 119
Directors’ Remuneration Report continued
Remuneration for 2023 continued
Dilution limits
In line with best practice, the use of new or treasury shares to satisfy the vesting of awards
made under the Company’s share plans is restricted to 10% in any ten-year rolling period.
A further restriction applies to discretionary share plans (PSP, LTIP and DBP) of 5% over the
same period of which 3.22% has been utilised.
Chairman and Non-executive Directors’ interest in shares
The Chairman and Non-executive Directors are not permitted to participate in any of the
Company’s incentive schemes nor are they required to build and retain a minimum
shareholding in the Company. They have discretion as to whether to hold the Company’s
shares or not. The table below sets out the beneficial interests in the ordinary shares of the
Company of each current Non-executive Director (including their closely associated persons)
during the year ended 31 December 2023.
Current Non-executive Director
Shares held at
1 January 2023 (or date of
joining)
Shares held at
31 December 2023
(or date of cessation)
Mark Williamson
Ravi Gopinath
Mandy Gradden
Alison Henwood
Ulf Quellmann
Bill Seeger
Cathy Turner
Kjersti Wiklund
17,282
–
–
947
2,398
3,000
2,660
1,500
18,718
–
–
947
2,477
3,000
2,660
1,500
There has been no change in the interests in shares of the Chairman and Non-executive
Directors between 1 January and 28 February 2024.
Share price
At 31 December 2023, the mid-market closing share price on the London Stock Exchange of a
Spectris ordinary share was 3,779 pence per share. The highest mid-market closing share price
in the year was 3,841 pence per share and the lowest was 2,935 pence per share.
Directors’ service contracts and letters of appointment
The Executive Directors have rolling contracts subject to 12 months’ notice of termination by
either party, or to summary notice in the event of a serious breach of the Director’s obligations,
dishonesty, serious misconduct or other conduct bringing the Company into disrepute. All
letters of appointment in respect of the Non-executive Directors are renewable at each AGM,
subject to review prior to proposal for re-election, and provide for a notice period of six months.
Ordinarily, appointments do not continue beyond nine years after first election, at which time
Non-executive Directors cease to be presumed independent under the Code.
The table below summarises the current Directors’ service contracts or terms of appointment.
Date of contract
Expiry date
Notice period
Length of service at
28 February 2024
Executive Director
Andrew Heath
3 Sept 2018
Derek Harding
1 Mar 2019
Non-executive Director
Rolling contract with no
fixed expiry date
Rolling contract with no
fixed expiry date
12 months
5 years 5 months
12 months
4 years 11 months
Mark Williamson
26 May 2017
Renewable at each AGM
6 months
6 years 10 months
Ravi Gopinath
1 Jun 2021
Renewable at each AGM
6 months
2 year 8 months
Mandy Gradden
16 Oct 2023
Renewable at each AGM
6 months
4 months
Alison Henwood
1 Sep 2021
Renewable at each AGM
6 months
2 year 5 months
Ulf Quellmann
Bill Seeger
Cathy Turner
1 Jan 2015
Renewable at each AGM
6 months
9 years 1 month
1 Jan 2015
Renewable at each AGM
6 months
9 years 1 month
1 Sep 2019
Renewable at each AGM
6 months
4 years 5 months
Kjersti Wiklund
19 Jan 2017
Renewable at each AGM
6 months
7 years 1 month
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 120
Directors’ Remuneration Report continued
External appointments – Executive Directors
Executive Directors may retain any payments received in respect of external non-executive
appointments held. Such appointments are normally limited to one per Director at any time
and are subject to the approval of the Board. Derek Harding became a Non-executive Director
of Sage Group plc in March 2021. During 2023, he received £70,000 (2022: £65,833) in fees for
that role. Andrew Heath did not hold any external non-executive appointments during 2023.
Summary of shareholder voting on Directors’ remuneration
The 2022 Directors’ Remuneration Report was approved by 95.90% of the votes cast at the
2023 AGM held on 26 May 2023. The 2023 Remuneration Policy was approved by shareholders
at a General Meeting held on 13 December 2022 by 95.50% of the votes cast, as detailed in the
table below:
2022 General
Meeting
2023 Directors’
Remuneration Policy
2023 AGM
2022 Directors’
Remuneration Report
Votes for
Votes against
Votes withheld
Number
%
Number
%
86,543,504
95.50% 4,077,799
4.50%
Number
38,488
84,047,913
95.90% 3,595,264
4.10%
38,929
Directors’ interest in contracts
No Director had, during the year or at the end of the year, any material interest in any contract
of significance to the Group’s business.
Loans to Directors
During the year, there were no outstanding loans to any Director.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 121
Directors’ Remuneration Report continued
Role of the Remuneration Committee
The Committee is responsible for recommending to the Board the Group’s Remuneration
Policy, including the remuneration arrangements for the Chairman, the Executive Directors
and members of the Executive Committee, and for the practical operation of the Policy.
It regularly reviews the balance between fixed and variable pay and the performance
conditions that attach to both short-term and long-term incentives. In 2023, the Committee
oversaw the setting of the first ESG targets under the Group’s long-term incentive arrangements
as part of the implementation of the 2023 Remuneration Policy. The Committee monitors the
level and structure of remuneration for senior management and takes into account workforce
remuneration, related policies and the alignment of incentives and rewards with the Group’s
culture.
The remuneration of Non-executive Directors is a matter reserved for the Board. The full
terms of reference for the Remuneration Committee are reviewed annually and are available
at www.spectris.com/corporategovernance
Committee members and attendees
All members of the Committee are independent Non-executive Directors. During 2023, the
members were Cathy Turner (Chairman), Ravi Gopinath, Ulf Quellmann and Kjersti Wiklund.
Details of each member’s attendance are disclosed on page 84. Only members of the
Committee have the right to attend meetings but other individuals and external advisers
may attend by invitation. The Chairman is invited to attend all meetings of the Committee.
During the year, the Committee also invited Andrew Heath (Chief Executive), Derek Harding
(CFO), Andrew Harvey (Group Human Resources Director) and Rebecca Dunn (Head of
Corporate Affairs) to attend certain meetings to provide advice to the Committee to allow it
to make informed decisions. No individual was present when their own remuneration was
being discussed.
The Committee also meets without management present and has received independent
remuneration advice during the year from the external advisers appointed to support
the Committee.
Committee activities in 2023
The Committee addressed the following key agenda items during its five formal meetings in 2023:
January
February
July
October
December
• Reviewed and approved incentive
• Approved CFO and Executive
• Reviewed projected outturn of 2021,
• Considered potential increase to
outcomes relating to the 2022 annual
bonus plan.
Committee salaries and Chairman’s
fee following annual review.
• Reviewed and approved outcomes
for the 2020 LTIP.
• Reviewed and considered the
possibility of a windfall gain in
respect of the 2020 LTIP and agreed
that no adjustments be made.
• Approved CEO salary increase.
• Approved Executive Directors’ and
Executive Committee’s 2023 bonus
arrangements, target performance
measures and personal objectives.
• Approved 2023 LTIP grant levels and
target range for performance
measures.
• Reviewed Executive Directors and
Executive Committee current and
projected shareholdings against the
requirements set out in the
Remuneration Policy.
• Reviewed and approved the 2022
Directors’ Remuneration Report.
2022 and 2023 LTIP.
Chairman’s fee.
• Considered and approved interim
LTIP awards for new joiners and
current employees below Board level.
• Approved minor changes to LTIP
Rules to reflect changes in UK tax
regulation.
• Reviewed external market practice
on remuneration matters with the
Committee’s external remuneration
adviser.
• Reviewed likely formulaic outcomes
of the 2023 bonus and 2021 LTIP
awards and discussed the need for
the Committee to consider any
upward or downward discretion in
relation to those likely outcomes.
• Review of projected outturn of 2022
and 2023 LTIP.
• Reviewed Executive Directors’ and
Executive Committee members’
shareholdings against the guidelines
set out in the Remuneration Policy.
• Reviewed the wider external
remuneration landscape, focusing on
executive pay, with the Committee’s
remuneration adviser.
• Review of the Committee’s Terms of
Reference.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 122
Directors’ Remuneration Report continued
Role of the Remuneration Committee continued
In line with the requirements of the Code to include explanation of the Company’s approach to
investing in and rewarding its workforce, some of the work that the Committee has carried out
in this area is set out below. The Committee has taken time during the year to review the
remuneration of the wider workforce, related policies and the alignment of incentives and
rewards with culture as part of its implementation of the 2023 Remuneration Policy.
Stakeholder Engagement
Values and culture in remuneration
The Group’s Values – Be True, Own It and Aim High are built into the Group’s performance
management framework. The Remuneration Committee has used this framework as the
foundation for the operational and strategic targets for the Executive Directors and Executive
Committee members for 2023. In assessing performance against these targets, the
Committee has also considered wider stakeholder experience during 2023. The employee
engagement survey was also used to obtain feedback from the workforce on remuneration
and this will continue in future surveys.
Stakeholder views
Recognising the inflationary pressures on the global workforce, the Committee has
worked closely with the Executive team to review the Group’s wider pay policies and particular
strategies for supporting employees through the cost of living challenges present in key
jurisdictions. The Committee focused on ensuring the approach taken to remuneration
balanced the interests of all stakeholders. Careful consideration has also been given by the
Committee to the guidance issued by investors and investor bodies on the management of
remuneration during this inflationary period.
Employee share ownership
Spectris is a proud advocate of employee share ownership. Due to the Group’s decentralised
structure, particular importance is placed on aligning management in our businesses with the
Group. Awards under the Spectris LTIP are granted to each management team within each
business to support the alignment of their interests with shareholders. In the UK, the Group
also manages a successful all-employee SIP to allow all UK-based employees to build a
shareholding in Spectris. For every five shares purchased by an employee under the SIP, the
Company awards one free Matching share.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 123
Directors’ Remuneration Report continued
Role of the Remuneration Committee continued
Gender pay gap reporting
Spectris plc employs fewer than 250 people in the UK and is therefore not required to publish
gender pay gap data. However, the Committee considers the issue of gender pay to be
important and therefore voluntarily calculates and discloses the Group’s gender pay gap. The
detailed disclosure is set out below and key metrics relating to the disclosure are included in
the Sustainability Report on page 57. As in previous years, the Committee elected to use the
data collated for the CEO pay ratio to produce a consistent gender pay gap disclosure, which
allows the Committee to analyse both key metrics from one source of data.
The median and mean gender pay gap have reduced by 19.4% and 47.0% respectively
compared to 2022 levels. This reduction further validates the Committee’s belief that men and
women are being paid equally for doing the same job and that the imbalance in the number of
male and female employees in similar roles, in the composition of the UK workforce, continues
to drive our gender pay gap. This imbalance is gradually improving but continues to be a core
focus of time and attention as we strive towards our commitment that 40% of the senior
leadership community will be comprised of women by 2030.
The Committee reviews the objectivity and independence of the advice it receives from its
advisers each year and is satisfied that both PwC and Aon provided credible and professional
advice during 2023.
Annual performance evaluation
The performance of the Committee was reviewed as part of the wider Board evaluation
process, led by the Company Secretary. Further details regarding the process followed are set
out on page 88. Following this review and the feedback received, the Committee considered
that it had operated effectively during the year.
2024 Remuneration Committee workplan
The Committee intends to focus on the following key areas during 2024:
• setting LTIP and bonus performance targets aligned to the 2023 Remuneration Policy;
• wider workforce remuneration structures and key policies; and
• monitoring of the Group’s Remuneration Policy against the Group’s strategy, market
practice, changes in the external governance environment and investor guidance.
Gender pay gap
Bonus gap
Non-management
Management
Total
By order of the Board
Median
Mean
Median
Mean
Median
Mean
15.5%
14.2%
13.0%
10.1%
10.3%
22.0%
12.1%
28.7%
15.0%
11.2%
11.5%
11.7%
Cathy Turner
Chairman of the Remuneration Committee
28 February 2024
% receiving a bonus
96.9%
94.8%
100.0% 100.0%
97.1%
95.3%
Male
Female
Male
Female
Male
Female
Advisers to the Committee
PwC was first appointed as independent remuneration adviser in January 2018. This
appointment took place following a competitive tender process. During 2023, PwC has provided
advisory support to the Committee on various aspects of the Directors’ remuneration, including:
• advice on emerging external market practice and stakeholder expectations relating to
executive remuneration;
analysis on all elements of the implementation of the 2023 Remuneration Policy; and
advice on the interpretation of investor body guidelines concerning remuneration outcomes.
•
•
PwC reports directly to the Committee Chairman. During 2023, PwC also provided certain
project advisory and tax services to the Company.
Aon separately supports the Company in relation to the Company’s share plans including
compiling IFRS 2 ‘Share-based Payment’ reporting on the Company’s share plans and
providing LTIP TSR performance calculations. Aon does not provide any other services to the
Company. Total fees paid during the financial year to these advisers were: PwC £87,250 (2022:
£153,081), and Aon £39,360 (2022: £32,760). These fees were charged on the basis of each firm’s
standard terms of business.
Both PwC and Aon are members of the Remuneration Consultants Group and adhere to its
Code of Conduct.
This Directors’ Remuneration Report for the year ended 31 December 2023 complies with the
requirements of the Listing Rules of the UK Listing authority, Schedule 8 of the Large- and
Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, as
amended in 2013, 2018 and 2019 and the provisions of the 2018 UK Corporate Governance Code.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 124
Directors’ Report
Directors’ Report
This section sets out the information required to be disclosed by the Company and the
Group in the Directors’ Report in compliance with the Companies Act 2006 (the Act), the
Listing Rules of the UK Listing Authority (Listing Rules) and the Disclosure Guidance and
Transparency Rules (DTR).
Overview of information required to be disclosed
Certain matters that would otherwise be disclosed in this Directors’ Report have been reported
elsewhere in this Annual Report. This report should therefore be read in conjunction with the
Strategic Report on pages 2 to 77 and the Governance section 80 to 127 which are incorporated
by reference into this Directors’ Report. The Strategic Report and this Directors’ Report,
together with other sections of this Annual Report and Accounts including the Governance
section on pages 80 to 127 are incorporated by reference, and when taken as a whole, form the
Management Report as required under Rule 4.1.5R of the DTR.
Disclosure
Acquisitions and disposals
Articles of Association
Annual General Meeting
Appointment and removal of Directors
Auditors’ re-appointment and remuneration
Authority to allot shares
Business model
Branches
Change of control
Community and charitable giving
Corporate governance
Reported in
Page reference
Strategic Report
Directors’ Report
Directors’ Report
Governance
Directors’ Report
Directors’ Report
Strategic Report
Directors’ Report
Directors’ Report
Strategic Report
Governance
Pages 40 and 41
Page 126
Page 126
Page 94
Page 126
Page 127
Pages 20 and 21
Page 126
Page 126
Pages 78 and 79
Pages 80 to 127
Directors’ conflicts of interest
Directors’ Report
Page 126
Directors’ details
Directors’ indemnity
Directors’ remuneration and interest
Directors’ responsibility statement
Disclosure of information to auditor
Diversity, equity and inclusion
Employee engagement
Governance
Pages 80 and 81
Directors’ Report
Page 126
Governance
Directors’ Report
Directors’ Report
Strategic Report
Strategic Report
Governance
Pages 102 to 123
Page 128
Page 127
Pages 56 and 57
Pages 54 and 55
and 89 to 91
Disclosure
Reported in
Page reference
Employee equal opportunities
Employee share plans
Employees with disabilities
Financial instruments
Strategic Report
Directors’ Report
Strategic Report
Directors’ Report
Pages 56 and 57
Page 126
Page 56
Page 126
Future developments and strategic priorities
Chief Executive Review
Pages 12 to 18
Going concern
Directors’ Report
Internal control and risk management systems
Governance
Non-financial information statement and index
Strategic Report
Ongoing director training and development
Governance
Political donations
Post balance sheet events
Powers of Directors
Principal Risks and risk management
Purchase of own shares
Research and development activities
Results and dividends
Rights and obligations attaching to shares including
restrictions on transfer of shares and voting rights
Directors’ Report
Directors’ Report
Directors’ Report
Strategic Report
Directors’ Report
Strategic Report
Directors’ Report
Directors’ Report
Page 126
Page 99
Page 77
Page 88
Page 126
Page 126
Page 126
Pages 46 to 50
Page 127
Page 10 and 11
Page 126
Page 127
Section 172 statement
Strategic Report
Page 7
Share capital
Stakeholder engagement
Streamlined Energy and Carbon disclosures
Substantial share interests
Treasury shares
Viability Statement
Governance
Pages 86 and 87
Directors’ Report
Page 127
Governance
Strategic Report
Directors’ Report
Director’s Report
Strategic Report
Pages 86 and 87
Pages 64 and 65
Page 127
Page 127
Page 51
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 125
Directors’ Report continued
Reporting on Diversity and inclusion
The following data sets out the range of gender and ethnic diversity on our Board and Executive Committee as at 31 December 2023. The data
also sets out the range of gender diversity for our Leadership community and employees as at 31 December 2023. We continue to consider the
most appropriate way to request and capture ethnicity data for these populations.
The gender and ethnic diversity data for our Board members was collected through a questionnaire which asked each Director how they
identified themselves using the categorisations set out in the Listing Rules. Where we already held gender and ethnicity data for the Executive
Committee through Workday, we have used that data, which already has consents in place to use it for reporting purposes on an anonymous
basis. The gender diversity data for our Leadership community and employees was also collected through Workday.
Gender diversity of the Board1 and the Group’s employees as at 31 December 2023
Gender
diversity
Men
Women
Not specified
prefer not to say
Board
members
% of
the Board
6
4
0
60%
40%
0
Senior
positions
on the Board
(CEO, CFO,
SID and
Chairman)
3
1
0
Executive
Committee
5
2
0
% of
Executive
Committee
71.43%
28.57%
0
Leadership
community
% of
Leadership
community
wider
employee
population
% of wider
employee
population
144
58
0
71.3%
28.7%2
4589
2390
67.14%
32.86%3
0
0
0
1. The Chief Executive and CFO are members of the Board and the Executive Committee and have been included in both the Board and Executive Committee gender data.
2. 2022: 20% of Leadership community.
3. 2022: 34.01% of wider employee population.
Ethnic diversity of the Board1 and Executive Committee as at 31 December 2023
Ethnic diversity
Board members
% of the Board
Senior positions
on the Board
(CEO, CFO, SID
and Chairman)
Executive Committee
% of Executive
Committee
White British or other White
(including minority-white groups)
Asian/Asian British
Mixed/Multiple Ethnic Groups
Black/African/Caribbean/Black British
Other ethnic group including Arab
Not specified prefer not to say
9
1
0
0
0
0
90%
10%
0
0
0
0
4
0
0
0
0
0
7
0
0
0
0
0
100%
0
0
0
0
0
1. The Chief Executive and CFO are members of the Board and the Executive Committee and have been included in both the Board and Executive Committee ethnicity data.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 126
Directors’ Report continued
Results and dividends
The financial results for the financial year ended 31 December 2023 are
set out on pages 136 to 203. Adjusted operating profit for the year
amounts to £262.5 million (2022: £222.4 million).
Directors
An interim dividend of 25.3 pence per share was paid on 10 November
2023 in respect of the half year ended 30 June 2023. The Board is
recommending a final dividend of 53.9 pence per share for the year
ended 31 December 2023. Together with the interim dividend paid in
November 2023, subject to shareholder approval of the final dividend,
total dividends for the year ended 31 December 2023 will amount to
79.2 pence per share.
Dividend details are given in note 8 to the Consolidated Financial
Statements on page 154.
Subject to the approval of shareholders at the 2024 AGM, the final
dividend will be paid on 28 June 2024 to those shareholders on the
register on 17 May 2024.
Directors’ conflicts of interest
Directors’ remuneration and
interest
Indemnity provisions
Articles of Association (‘Articles’) The Company’s Articles contain specific provisions and restrictions
Annual General Meeting (‘AGM’)
Auditor’s re-appointment and
remuneration
Branches
Change of control
regarding the Company’s powers to borrow money. Powers relating to
pre-emptive rights, allotment of shares and purchase of the Company’s
own shares are also included in the Articles and such authorities are
renewed by shareholders each year at the Annual General Meeting. The
Articles also give power to the Board to appoint and remove Directors
and require Directors to submit themselves for election at the first AGM
following their appointment and for annual re-election at subsequent
AGMs. The Articles may be amended by special resolution of the
shareholders. The Company’s Articles are available on the Company’s
website: www.spectris.com.
It is intended that the 2024 AGM will be held at 3:00pm on Thursday
23 May 2024 at Melbourne House, 5th floor, 44-46 Aldwych, London
WC2B 4LL. The Notice of the AGM accompanies this Annual Report and
is available at www.spectris.com/AnnualGeneralMeeting.
Resolutions for the re-appointment of Deloitte LLP as the Company’s
auditor and to authorise the Directors, acting through the Audit and
Risk Committee, to agree the remuneration of the auditor are to be
proposed at the 2024 AGM.
The Spectris Group, through various subsidiaries, has established
branches in a number of different countries in which the business
operates.
There are a number of agreements that take effect, alter or terminate
upon a change of control of the Group following a takeover, such as
bank loan agreements and Company share plans. None of these are
deemed to be significant in terms of their potential impact on the
business of the Group as a whole. It is also possible that funding
arrangements for the Group’s defined benefit pension arrangements
would need to be enhanced following a change in control if that
resulted in a weakening of the employer covenant. The Company does
not have any agreements with any Director that would provide for
enhanced compensation for loss of office or employment following
a takeover bid.
Directors’ powers
Employee share plans
Financial instruments
Going concern and Viability
Statement
Political donations
Post balance sheet events
None.
Details of the Directors who served during the year are set out on pages
80 and 81. Mandy Gradden was appointed to the Board on 16 October
2023. Directors are appointed and replaced in accordance with the
Articles, the Act and the Code.
The Board has an established process to review at least annually, and, if
appropriate, authorise conflicts of interest. Any transactional conflicts
are reviewed as they arise. Directors are asked to review and confirm
reported conflicts of interest as part of the year-end process.
Details of Directors’ remuneration and their interest in the Company’s
shares are set out in the Directors’ Remuneration Report on pages 102
to 123.
The Spectris Group maintains liability insurance for its Directors and
officers. The Directors and Company Secretary have also been granted
a third-party indemnity, under the Act, which remains in force. Neither
the Company’s indemnity nor insurance provides cover in the event
that an indemnified individual is proven to have acted fraudulently
or dishonestly.
During the year and at the date of this report, the Company has in place
Pension Trustee Liability Insurance for the Trustees of the Spectris
pension plan.
The business of the Company is managed by the Board, which may
exercise all the powers of the Company subject to the Articles and
the Act.
Details of employee share plans are set out in note 22 to the
Consolidated Financial Statements on page 169 to 173.
Details of the Group’s financial risk management in relation to its
financial instruments are given in note 27 to the Consolidated Financial
Statements on pages 181 to 184.
Having reviewed the Group’s plans and available financial facilities, the
Board has a reasonable expectation that the Group has adequate
resources to continue in operational existence for at least 12 months
following the signing of the accounts. For this reason, it continues to
adopt the going concern basis in preparing the Group’s accounts. The
Company’s Viability Statement can be found on page 51.
The Group’s policy is not to make any political donations and none were
made during the financial year ended 31 December 2023 (2022: nil).
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 127
Substantial shareholders
As at 31 December 2023, the Company had received formal notifications of
the following holdings in its ordinary shares in accordance with DTR 5:
Directors’ Report continued
Purchase of own shares
The Company was authorised by shareholders at the 2023 AGM to
purchase in the market ordinary shares with a nominal value of 5 pence
each up to an amount not exceeding 10% of the Company’s issued
share capital, as permitted under the Company’s Articles.
During the year ended 31 December 2023, 3,382,896 ordinary shares
were repurchased and cancelled by the Group, in the final tranches of
the £300 million share buyback programme announced on 19 April
2022 and part of the first tranche of the £150 million share buyback
announced on 11 December 2023. This resulted in a cash outflow of
£114.9 million, including transaction fees of £1.2 million. The shares
repurchased in 2023 represented 3.33 % of the Company’s issued share
capital, excluding the shares held in treasury, on 31 December 2023.
The £150 million share buyback programme which commenced on
13 December 2023 was launched having considered the future
acquisition pipeline of the Group alongside its balance sheet position.
The initial tranche for £50 million was launched pursuant to the
authority granted by the Company’s shareholders at the 2023 AGM
and is expected to be completed by 31 May 2024.
This standard authority is renewable annually and the Directors will
seek to renew this authority at the 2024 AGM in order to complete the
remaining £100 million of the share buyback programme.
Share capital
Shareholders’ rights and
obligations attaching to shares
The share capital of the Company comprises ordinary shares of 5 pence
each: each share (with the exception of those held by the Company in
Treasury) carries the right to one vote at general meetings of the
Company. The Company may reduce or vary the rights attaching to its
share capital by special resolution subject to the Articles and applicable
laws and regulations. The issued share capital of the Company together
with movements in the Company’s issued share capital during the year
are shown in note 21 to the Financial Statements on page 169.
The Articles (available on the Company’s website www.spectris.com)
contain provisions governing the ownership and transfer of shares.
All shareholders have equal voting rights with one vote per share and
there are no special control rights attaching to the shares. There are
no restrictions on the transfer of shares or voting rights (under any
agreement or otherwise) beyond those required by applicable law
under the Articles or under any applicable share dealing policy.
Subject to any special rights or restrictions, every shareholder on the
Register not less than 48 working hours before the time fixed for a
general meeting, will have one vote for every fully-paid share that they
hold. Shareholders may cast votes either personally or by proxy, and a
proxy need not be a shareholder. Details relating to the appointment of
proxies and registration of voting instructions for the 2024 AGM are set
out in the Notice of AGM accompanying this Annual Report.
Related party transactions
Details of related party transactions are set out in note 31 to the
Financial Statements on page 184.
Treasury shares
FMR LLC
BlackRock
UBS
Shareholding
in Spectris
shares
Date of
notification
Percentage of
issued share
capital at date
of notification
8,682,229
01 Jan 2020
7.48%
6,409,477
19 June 2023 6.12%
5,954,961
11 Jan 2021
5.12%
Massachusetts Financial
Services Company
5,178,500
15 Mar 2022
4.67%
Between 31 December 2023 and the date of this report, the Company
received the following notifications from:
• BlackRock, on 8 January 2024, of a holding of 4.89% of voting rights
•
attached to shares + 1.75% of voting rights through financial instruments
held totalling 6.64% (6,764,388).
BlackRock, on 11 January 2024, of a holding of 5.12 % voting rights
attached to shares + 1.60% voting rights through financial instruments
held totalling 6.72% (6,836,308).
A list of the Company’s major shareholders is set out on page 203.
Shares held by the Company in treasury do not have voting rights and are
not eligible to receive dividends.
Disclosures required under
UK Listing Rule 9.8.4
There are no disclosures required to be made under UK Listing Rule 9.8.4
other than in respect of long-term incentive schemes, details of which are
set out in the Directors’ Remuneration Report on pages 102 to 123.
Disclosure of information
to auditor
The Directors who held office at the date of approval of the Directors’
Report confirm that:
• so far as they are each aware, there is no relevant audit information,
which would be needed by the Company’s auditor in connection with
preparing its audit report, of which the Company’s auditor is unaware;
and
• each Director has taken all steps that they ought to have taken as a
Director in order to make themselves aware of any relevant audit
information and to establish that the Company’s auditor is aware of that
information.
On behalf of the Board
Rebecca Dunn
Head of Corporate Affairs and Company Secretary
28 February 2024
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 128
Statement of Directors’ responsibilities in respect
of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report, Directors’ Remuneration Report
and the Group and Company Financial Statements in accordance with applicable law and
regulations.
Company law requires Directors to prepare the Group Financial Statements in accordance with
the UK Adopted International Financial Reporting Standards. Under company law, Directors
must prepare Group and Company Financial Statements for each financial year and must not
approve the Financial Statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and Company and of their profit or loss for that period.
In preparing each of the Group and Company Financial Statements, the Directors are required to:
• select accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• for the Group Financial Statements, state whether they have been prepared in conformity
with the requirements of UK Adopted International Financial Reporting Standards;
Directors’ responsibility statement
We confirm that to the best of our knowledge:
• the Financial Statements, prepared in accordance with the applicable set of accounting
standards, give a true and fair view of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation taken as a whole;
• the Strategic Report on pages 2 to 77 and the Directors’ Report on pages 80 to 127 include a
fair review of the development and performance of the business and the position of the
Group and the undertakings included in the consolidation taken as a whole, together with a
description of the Principal Risks and uncertainties that they face; and
• the Annual Report and Accounts taken as a whole, is fair, balanced and understandable, and
provides the information necessary for shareholders to assess the Group’s performance,
business model and strategy.
The Strategic Report and the Directors’ Report were approved by the Board on 28 February 2024.
• for the Company Financial Statements, state whether applicable UK Accounting Standards
By order of the Board
have been followed, subject to any material departures disclosed and explained in the
Company Financial Statements; and
• prepare the Financial Statements on the going concern basis unless it is inappropriate to
presume that the Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to
show and explain the Company’s transactions and disclose with reasonable accuracy at any
time the financial position of the Company and enable them to ensure that its Financial
Statements comply with the Companies Act 2006. They have general responsibility for taking
such steps as are reasonably open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a
Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance
Statement that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
Andrew Heath
Chief Executive
Derek Harding
Chief Financial Officer
28 February 2024
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 129
Independent auditor’s
report to the members
of Spectris plc
Report on the audit of the financial statements
1. Opinion
In our opinion:
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK)
(ISAs (UK)) and applicable law. Our responsibilities under those standards are further described
in the auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the Parent Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the
Financial Reporting Council’s (the FRC’s) Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. The non-audit services provided to the Group and Parent Company for the
year are disclosed in note 4 to the financial statements. We confirm that we have not
provided any non-audit services prohibited by the FRC’s Ethical Standard to the Group or the
Parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
3.
Summary of our audit approach
• the financial statements of Spectris Plc (the Parent Company) and its subsidiaries
(the Group) give a true and fair view of the state of the Group’s and of the Parent
Company’s affairs as at 31 December 2023 and of the Group’s profit for the year then
ended;
• the Group financial statements have been properly prepared in accordance with United
Kingdom adopted international accounting standards;
Key audit
matters
The key audit matter that we identified in the current year was:
• Revenue recognition
Materiality
The materiality that we used for the Group financial statements was
£13.1 million which equates to 5% of adjusted profit before tax.
• the Parent Company financial statements have been properly prepared in accordance
with United Kingdom Generally Accepted Accounting Practice, including Financial
Reporting Standard 101 ‘Reduced Disclosure Framework’; and
• the financial statements have been prepared in accordance with the requirements of
Scoping
Full scope audit work was completed on 36 components and specified
audit procedures were undertaken on a further 4 components. Our full
scope and specified audit procedures represent 76% of total Group revenue
and 70% of Group adjusted profit before tax.
Significant
changes in
our approach
Our audit approach is consistent with the previous year with the exception
of the change in the number of components in full scope audits and
specified audit procedures. This change reflects the developments in the
business relating to the Group’s acquisitions and disposals in the year.
the Companies Act 2006.
We have audited the financial statements which comprise:
• the Consolidated Income Statement;
• the Consolidated Statement of Comprehensive Income;
• the Consolidated and Parent Company Statements of Financial Position;
• the Consolidated and Parent Company Statements of Changes in Equity;
• the Consolidated Statement of Cash Flows;
• the Notes to the Consolidated Accounts 1 to 33 and Notes to the Parent Company Accounts
1 to 14.
The financial reporting framework that has been applied in the preparation of the Group
financial statements is applicable law and United Kingdom adopted international accounting
standards. The financial reporting framework that has been applied in the preparation of the
Parent Company financial statements is applicable law and United Kingdom Accounting
Standards, including FRS 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally
Accepted Accounting Practice).
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023
130
Independent auditor’s report to the members of Spectris plc continued
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going
concern basis of accounting in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s and Parent Company’s ability to
continue to adopt the going concern basis of accounting included:
• evaluating the financing facilities available to the Group including the nature of facilities,
repayment terms and covenants;
• challenging the assumptions used in the forecasts by reference to historical performance,
trading run rate, and other supporting evidence, such as business disposal agreements and
the current macroeconomic environment;
• recalculating and assessing the amount of cash and covenant headroom in the forecasts;
and
• performing a sensitivity analysis to consider specific scenarios, including a reverse stress test
based on a reduction in revenue and associated margin.
Based on the work we have performed, we have not identified any material uncertainties
relating to events or conditions that, individually or collectively, may cast significant doubt on
the Group’s and Parent Company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code,
we have nothing material to add or draw attention to in relation to the directors’ statement in
the financial statements about whether the directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial statements of the current period and include the
most significant assessed risks of material misstatement (whether or not due to fraud) that
we identified. These matters included those which had the greatest effect on: the overall
audit strategy, the allocation of resources in the audit; and directing the efforts of the
engagement team.
These matters were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
5.1. Revenue recognition
Key audit
matter
description
How the
scope of
our audit
responded to
the key audit
matter
The Group recognised revenue of £1,449 million (2022: £1,327 million)
predominantly through the provision of goods and services accounted for
under IFRS 15 Revenue from Contracts with Customers. Given the number
of businesses in the Group, the variety of revenue streams and the bespoke
nature of businesses spanning across numerous countries and industries;
understanding the revenue cycles in each business and their respective
control environments underpinned our risk assessment and the basis for
our planned audit procedures.
We identified a key audit matter relating to a risk of material misstatement
in relation to cut-off for revenue recognition. The risk relates to the potential
overstatement of revenue within certain components where a significantly
higher-than-average value of revenue is recognised in December 2023
compared to the rest of the year.
Note 1 to the Consolidated Financial Statements sets out the Group’s
accounting policy for revenue recognition and notes 2 and 3 include details
of the Group’s revenue by segment and timing of revenue recognition.
We designed our audit procedures to be specific to each operating
company to which the cut-off risk has been identified. Consequently,
we have performed a combination of the following audit procedures
as relevant:
• Obtained an understanding of the relevant controls over the revenue
recognition process, specifically in relation to cut-off and in one instance
tested the operating effectiveness of these relevant controls;
• Assessed a sample of revenue recognised in December 2023 and
January 2024 against third-party supporting evidence to determine
when the performance obligations had been satisfied and whether the
appropriate cut-off was applied;
• Considered material contracts with multiple performance obligations
and assessed the identification of separate performance obligations, the
timing of revenue recognition and the evidence of the performance
obligations being satisfied;
• Challenged the appropriateness of accrued income recognised by agreeing
a sample to supporting evidence and assessing whether the performance
obligation had been met or partially met (as appropriate); and
• Obtained a schedule of adjusting and manual journals posted in
December 2023 with a credit impact on revenue; and on a sample basis,
assessed the adjustments and manual journals against supporting
evidence.
Key
observations
We consider that revenue across the Group has been appropriately
recognised and that the year-end cut-off is materially accurate. We concur
with management’s accounting policies and their application across
the Group.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 Independent auditor’s report to the members of Spectris plc continued
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that
makes it probable that the economic decisions of a reasonably knowledgeable person would
be changed or influenced. We use materiality both in planning the scope of our audit work
and in evaluating the results of our work.
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that,
in aggregate, uncorrected and undetected misstatements exceed the materiality for the
financial statements as a whole.
Group financial statements
Parent Company financial statements
Based on our professional judgement, we determined materiality for the financial statements
as a whole as follows:
Performance
materiality
70% (2022: 70%) of Group
materiality
70% (2022: 70%) of Parent
Company materiality
131
Basis and
rationale for
determining
performance
materiality
In determining performance materiality, we considered the following factors:
• Our risk assessment, including our assessment of the Group’s overall
control environment and our past experience of the audit;
• The disaggregated nature of the Group which reduces the likelihood of
an individually material error; and
• The low number of corrected and uncorrected misstatements identified
in previous audits.
6.3. Error reporting threshold
We agreed with the Audit and Risk Committee that we would report to the Committee all
audit differences in excess of £0.6 million (2022: £0.5 million), as well as differences below that
threshold that, in our view, warranted reporting on qualitative grounds. We also report to the
Audit and Risk Committee on disclosure matters that we identified when assessing the overall
presentation of the financial statements.
Group financial statements
Parent Company financial statements
Materiality
£13.1 million (2022: £10.9 million)
£8.3 million (2022: £6.7 million)
Basis for
determining
materiality
Rationale
for the
benchmark
applied
5% (2022: 5%) of adjusted profit
before tax.
1% (2022: 1%) of the Parent
Company’s net assets.
We consider net assets to be the
most appropriate benchmark as
the Parent Company is a non-
trading entity, whose primary
function within the Spectris Group
is to act as a holding company.
Adjusted profit before tax is a
key performance measure for
management, investors and the
analyst community. This metric is
important to the users of the
financial statements because it
portrays the performance of the
business and hence its ability to
pay a return on investment to the
investors. Likewise, this metric takes
into account the acquisitive nature
of the Group which results in
adjusting items needing to be
considered when determining the
performance of the business.
Refer to the Appendix to the
Consolidated Financial Statements
for the Group’s definition and
calculation of Alternative
Performance Measures.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 132
Independent auditor’s report to the members of Spectris plc continued
Identification and scoping of components
7. An overview of the scope of our audit
7.1.
The Group operates in more than 30 countries spread across five continents with the largest
footprint being in North America, Asia and Europe. Our Group audit was scoped by obtaining
an understanding of the Group and its environment, including Group-wide controls, and
assessing the risks of material misstatement at the Group and component level.
Within the Group, financial information is reported through individual reporting entities, which
combine to make up the segments reported externally to the market. We have defined each
component to be at the reporting entity level. In determining the audit scope, we have
considered the following at the component level to obtain sufficient coverage over the risks of
material misstatement and for the Group as a whole:
• Qualitative and quantitative risk factors which are risk driven and based on the component
materiality range of £3.4 million to £8.3 million;
• The importance of the divisional businesses as part of the overall Group strategy;
• Changes in the legal entity structure and local statutory environment;
• Changes in finance systems and control environment; and
• The ability to centralise audit effort into fewer locations.
Given the highly disaggregated nature of the Group’s components, we have also considered
coverage over key benchmarks, being revenue and adjusted profit before tax when
determining the appropriateness of the audit scope to support the Group audit opinion.
We have scoped the Group in a way that allows us to obtain sufficient coverage not only at a
Group level but also across the Group’s two divisions and other businesses. This is consistent
with previous years in both methodology and quantum of expected coverage. Full scope
audit work was completed on 36 (2022: 44) components and specified audit procedures were
undertaken on a further four (2022: two) components.
Our full scope and specified audit procedures represent 76% (2022: 73%) of total Group revenue
and 70% (2022: 83%) of Group adjusted profit before tax. The Parent Company is located in the
UK and is audited directly by the Group audit team. Our work on the components, including
the Parent Company, was executed at levels of materiality applicable to each individual
component, which were lower than Group materiality and ranged from £3.4 million to £8.3
million (2022: £3.3 million to £6.7 million).
At the Group level we also tested the consolidation process and carried out analytical
procedures to obtain further assurance that there were no significant risks of material
misstatement of the aggregated financial information of the remaining components not
subject to audit or specified audit procedures.
7.2. Our consideration of the control environment
The Group operates a range of IT systems which underpin the financial reporting process.
This can vary by geography and/or reporting entity. For certain components subject to full
scope audits, we identified relevant IT systems for the purpose of our audit work. These were
typically the principal Enterprise Resource Planning (ERP) systems for each relevant
component that govern the general ledger and transaction accounting balances and also
included the Group’s consolidation system. Our approach was principally designed to inform
our risk assessment and, as such, we obtained an understanding of relevant IT controls and
tested the general IT controls for some operating entities using our IT specialists.
In the current year we did not plan to rely on the operating effectiveness of controls.
This strategy reflected our historic knowledge of the control environment, which we
reconfirmed in the current year, as well as our understanding of the Group’s business
transformation programme. This programme seeks to enhance the internal control framework
and has both IT and business control aspects. Therefore, in addition to the audit work on IT
controls described above, additional audit work on controls was limited to obtaining an
understanding of the relevant controls in key financial reporting process cycles to inform our
risk assessment.
The Group continues to invest time in responding to and addressing our observations.
Management determines their response to these observations and continues to monitor their
resolution with reporting to and oversight from the Audit and Risk Committee as explained in
the Audit and Risk Committee report on pages 95 to 101. As management develops and
completes the business transformation project, we expect our audit approach to evolve in
future years alongside these developments in the internal control environment.
7.3. Our consideration of climate-related risks
In planning our audit, we have considered the potential impact of climate change on the
Group’s business and its financial statements.
The Group has assessed the risk and opportunities relevant to climate change and this remains
a principal risk for the Group. The risk has also been considered and embedded into the
businesses as explained in the Strategic Report.
As part of our audit procedures, we have obtained management’s climate-related risk
assessment and held discussions with those charged with governance to understand the
process of identifying climate-related risks, the determination of mitigating actions and the
impact on the Group’s financial statements. While management has acknowledged the risks
posed by climate change, they have assessed that climate change does not create any further
key sources of estimation uncertainty in the financial statements as at 31 December 2023 as
explained in note 1 on page 139.
We performed our own qualitative risk assessment of the potential impact of climate change
on the Group’s account balances and classes of transactions and did not identify any additional
risks of material misstatement. Our procedures include reading disclosures included in the
Strategic Report to consider whether they are materially consistent with the financial
statements and our knowledge obtained in the audit.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 133
Independent auditor’s report to the members of Spectris plc continued
7.4. Working with other auditors
Our oversight of component auditors focussed on the planning of their audit work and
understanding of their risk assessment process to identify key areas of estimates and
judgements, as well as the execution of their audit work. We sent our component teams
detailed instructions, reviewed and challenged the related component inter-office reporting
and findings from their work, reviewed relevant documents in underlying audit files, attended
component audit closing conference calls and held regular remote meetings to interact on any
related audit and accounting matters which arose. We also visited and were visited by some
component audit teams and held in-person discussions.
Dedicated members of the Group audit team were assigned to each component to facilitate
an effective and consistent approach to component oversight.
8. Other information
The other information comprises the information included in the annual report (including the
Strategic Report, Governance, Appendix – Alternative Performance Measures, and Additional
Information), other than the financial statements and our auditor’s report thereon. The
directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to
the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements, or our knowledge obtained
in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are required to report that fact.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but
is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located
on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor’s report.
11.
Extent to which the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations.
We design procedures in line with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud. The extent to which our procedures
are capable of detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including
fraud and non-compliance with laws and regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance
including the design of the Group’s remuneration policies, key drivers for directors’
remuneration, bonus levels and performance targets;
• results of our enquiries of management, internal audit, the directors and the Audit and Risk
Committee about their own identification and assessment of the risks of irregularities,
including those that are specific to the Group’s sector;
• any matters we identified having obtained and reviewed the Group’s documentation of their
We have nothing to report in this regard.
policies and procedures relating to:
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s
and the Parent Company’s ability to continue as a going concern, disclosing as applicable,
matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or the Parent Company or to cease operations, or
have no realistic alternative but to do so.
– identifying, evaluating and complying with laws and regulations and whether they were
aware of any instances of non-compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any
actual, suspected or alleged fraud;
– the internal controls established to mitigate risks of fraud or non-compliance with laws
and regulations;
• the matters discussed among the audit engagement team including significant component
audit teams and relevant internal specialists, including tax, valuation, pension and IT
specialists regarding how and where fraud might occur in the financial statements and any
potential indicators of fraud.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 134
Independent auditor’s report to the members of Spectris plc continued
As a result of these procedures, we considered the opportunities and incentives that may exist
within the organisation for fraud and identified the greatest potential for fraud in the following
area: revenue recognition. In common with all audits under ISAs (UK), we are also required to
perform specific procedures to respond to the risk of management override.
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly
prepared in accordance with the Companies Act 2006.
We also obtained an understanding of the legal and regulatory frameworks that the Group
operates in, focusing on provisions of those laws and regulations that had a direct effect on the
determination of material amounts and disclosures in the financial statements. The key laws
and regulations we considered in this context included the UK Companies Act, Listing Rules,
pensions legislation and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct
effect on the financial statements but compliance with which may be fundamental to the
Group’s ability to operate or to avoid a material penalty.
11.2. Audit response to risks identified
As a result of performing the above, we identified revenue recognition as a key audit matter
related to the potential risk of fraud. The key audit matters section of our report explains the
matter in more detail and also describes the specific procedures we performed in response to
that key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to
assess compliance with provisions of relevant laws and regulations described as having a
direct effect on the financial statements;
• enquiring of management, the Audit and Risk Committee and in-house legal counsel
concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that
may indicate risks of material misstatement due to fraud;
• reading minutes of meetings of those charged with governance, reviewing internal audit
•
reports and reviewing correspondence with HMRC; and
in addressing the risk of fraud through management override of controls, testing the
appropriateness of journal entries and other adjustments; assessing whether the
judgements made in making accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions that are unusual or outside
the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all
engagement team members including internal specialists and significant component audit
teams, and remained alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding of the Group and the Parent Company and
their environment obtained in the course of the audit, we have not identified any material
misstatements in the strategic report or the directors’ report.
13. Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern,
longer-term viability and that part of the Corporate Governance Statement relating to the
Group’s compliance with the provisions of the UK Corporate Governance Code specified for
our review.
Based on the work undertaken as part of our audit, we have concluded that each of the
following elements of the Corporate Governance Statement is materially consistent with the
financial statements and our knowledge obtained during the audit:
• the directors’ statement with regards to the appropriateness of adopting the going concern
basis of accounting and any material uncertainties identified, set out on page 126;
• the directors’ explanation as to its assessment of the Group’s prospects, the period this
assessment covers and why the period is appropriate, set out on page 126;
• the directors’ statement on fair, balanced and understandable, set out on page 128;
• the board’s confirmation that it has carried out a robust assessment of the emerging and
Principal Risks, set out on page 48;
• the section of the annual report that describes the review of effectiveness of risk
management and internal control systems, set out on page 99; and
• the section describing the work of the Audit and Risk Committee, set out on page 95.
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
• the Parent Company financial statements are not in agreement with the accounting records
and returns.
We have nothing to report in respect of these matters.
.
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 135
Independent auditor’s report to the members of Spectris plc continued
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures
of directors’ remuneration have not been made or the part of the directors’ remuneration report
to be audited is not in agreement with the accounting records and returns.
15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the Audit and Risk Committee, we were appointed by the
Board of Directors on 28 July 2016 to audit the financial statements for the year ending 31
December 2017 and subsequent financial periods. The period of total uninterrupted
engagement including previous renewals and reappointments of the firm is seven years,
covering the years ending 31 December 2017 to 31 December 2023.
15.2. Consistency of the audit report with the additional report to the Audit and Risk
Committee
Our audit opinion is consistent with the additional report to the Audit and Risk Committee we
are required to provide in accordance with ISAs (UK).
16. Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3
of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might
state to the company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency
Rule (DTR) 4.1.15R – DTR 4.1.18R, these financial statements will form part of the Electronic
Format Annual Financial Report filed on the National Storage Mechanism of the FCA in
accordance with DTR 4.1.15R – DTR 4.1.18R. This auditor’s report provides no assurance over
whether the Electronic Format Annual Financial Report has been prepared in compliance with
DTR 4.1.15R – DTR 4.1.18R.
Andrew Bond, FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London UK
28 February 2024
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023 136
Consolidated Income Statement
For the year ended 31 December 2023
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2023
Profit for the year attributable to owners of the Company
Other comprehensive (loss)/income:
Items that will not be reclassified to the Consolidated Income
Statement:
Re-measurement of net defined benefit obligation
Fair value (loss)/gain and foreign exchange movements on translation
of investment in equity instruments designated as at fair value
through other comprehensive income
Tax credit/(charge) on items above
Items that are or may be reclassified subsequently to the
Consolidated Income Statement:
Net gain on effective portion of changes in fair value of forward
exchange contracts on cash flow hedges
Foreign exchange movements on translation of overseas operations
Currency translation differences transferred to profit on disposal of
business
Tax charge on items above
Total other comprehensive (loss)/income
Total comprehensive income for the year attributable to owners of
the Company
Note
2023
£m
145.4
2022
£m
401.5
19
12
7
24
7
(0.6)
13.1
(5.0)
0.2
(5.4)
6.1
(42.5)
–
(1.1)
(37.5)
(42.9)
5.0
(4.0)
14.1
0.4
105.1
(86.7)
–
18.8
32.9
102.5
434.4
Continuing operations
Revenue
Cost of sales
Gross profit
Indirect production and engineering expenses
Sales and marketing expenses
Administrative expenses
Operating profit
Fair value through profit and loss movements on debt investments
Share of post-tax results of associates
(Loss)/profit on disposal of businesses
Financial income
Finance costs
Profit before tax
Taxation charge
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year from continuing and discontinued operations
attributable to owners of the Company
Earnings per share
From continuing operations
Basic
Diluted
From continuing and discontinued operations
Basic
Diluted
Dividends – amounts arising in respect of the year
Interim dividend paid and final dividend proposed/paid for the year
(per share)
Dividends paid during the year (per share)
Note
2,3
2023
£m
2022
£m
1,449.2
(611.1)
838.1
1,327.4
(576.6)
750.8
(126.9)
(249.6)
(273.0)
188.6
2.8
(0.1)
(12.6)
11.0
(4.1)
185.6
(40.2)
145.4
–
(114.1)
(233.0)
(231.1)
172.6
(4.1)
–
0.3
1.9
(19.2)
151.5
(36.7)
114.8
286.7
145.4
401.5
140.3p
139.4p
140.3p
139.4p
106.7p
106.0p
373.1p
370.7p
79.2p
76.6p
75.4p
72.9p
2,4
27
2
24
6
6
7
24
9
9
9
9
8
8
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
At 1 January 2023
Profit for the year
Other comprehensive (loss)/income
Total comprehensive income/(loss) for the year
Transactions with owners recorded directly in equity:
Equity dividends paid by the Company
Own shares acquired for share buyback programme
Share-based payments, net of tax
Proceeds from exercise of equity-settled options
At 31 December 2023
For the year ended 31 December 2022
At 1 January 2022
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners recorded directly in equity:
Equity dividends paid by the Company
Own shares acquired for share buyback programme
Share-based payments, net of tax
Proceeds from exercise of equity-settled options
At 31 December 2022
Note
8
21
22
Note
8
21
22
Share
capital
£m
5.5
Share
premium
£m
231.4
–
–
–
–
(0.2)
–
–
5.3
–
–
–
–
–
–
–
231.4
Retained
earnings
£m
1,113.0
145.4
(4.9)
140.5
(79.7)
(160.8)
16.4
0.6
1,030.0
Share
capital
£m
5.8
Share
premium
£m
231.4
Retained
earnings
£m
957.6
–
–
–
–
(0.3)
–
–
5.5
–
–
–
–
–
–
–
231.4
401.5
12.7
414.2
(78.6)
(191.0)
10.6
0.2
1,113.0
Translation
reserve
£m
86.0
–
(43.0)
(43.0)
–
–
–
–
43.0
Translation
reserve
£m
66.2
–
19.8
19.8
–
–
–
–
86.0
137
Merger
reserve
£m
3.1
Capital
redemption
reserve
£m
Total
equity
£m
1.0
1,436.9
Hedging
reserve
£m
(3.1)
–
5.0
5.0
–
–
–
–
1.9
–
–
–
–
–
–
–
3.1
Hedging
reserve
£m
(3.5)
Merger
reserve
£m
3.1
–
0.4
0.4
–
–
–
–
(3.1)
–
–
–
–
–
–
–
3.1
–
–
–
–
0.2
–
–
1.2
Capital
redemption
reserve
£m
0.7
–
–
–
–
0.3
–
–
1.0
145.4
(42.9)
102.5
(79.7)
(160.8)
16.4
0.6
1,315.9
Total
equity
£m
1,261.3
401.5
32.9
434.4
(78.6)
(191.0)
10.6
0.2
1,436.9
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 138
Consolidated Statement of Financial Position
As at 31 December 2023
ASSETS
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Investments in equity instruments
Investment in debt instruments
Investment in associates
Derivative financial instruments
Other receivables
Deferred tax assets
Retirement benefit assets
Current assets
Inventories
Current tax assets
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Assets held for sale
Total assets
LIABILITIES
Current liabilities
Borrowings
Derivative financial instruments
Trade and other payables
Lease liabilities
Current tax liabilities
Provisions
Liabilities held for sale
Net current assets
Non-current liabilities
Other payables
Derivative financial instruments
Lease liabilities
Provisions
Retirement benefit obligations
Deferred tax liabilities
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Retained earnings
Translation reserve
Hedging reserve
Merger reserve
Capital redemption reserve
Total equity attributable to owners of the Company
Note
17
27
18
19
20
21
21
21
21
21
2023
£m
(15.1)
(0.1)
(48.3)
(2.6)
(11.6)
(1.3)
(79.0)
2022
£m
(13.8)
(0.2)
(50.2)
(4.4)
(8.9)
(15.6)
(93.1)
(501.8)
1,315.9
(511.1)
1,436.9
5.3
231.4
1,030.0
43.0
1.9
3.1
1.2
1,315.9
5.5
231.4
1,113.0
86.0
(3.1)
3.1
1.0
1,436.9
The Financial Statements on pages 136 to 189 were approved by the Board of Directors on 28
February 2024 and were signed on its behalf by:
Derek Harding
Chief Financial Officer
Company Registration No. 02025003
Note
2023
£m
2022
£m
10
10
11
11
12
27
12
27
14
20
19
13
14
27
15
24
16
27
17
18
24
565.5
167.1
136.2
58.1
24.3
21.7
10.8
0.4
5.9
26.6
2.4
1,019.0
231.8
7.2
317.9
5.8
138.5
97.5
798.7
606.1
184.1
160.7
59.7
29.3
18.9
2.9
0.4
4.2
16.2
–
1,082.5
263.3
8.6
362.5
1.3
228.1
1.7
865.5
1,817.7
1,948.0
–
(0.1)
(369.4)
(14.4)
(12.6)
(8.5)
(17.8)
(422.8)
375.9
(0.1)
(2.3)
(373.7)
(14.9)
(14.2)
(12.8)
–
(418.0)
447.5
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Consolidated Statement of Cash Flows
For the year ended 31 December 2023
Notes to the Accounts
139
Cash generated from operations
Net income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets
Proceeds from disposal of property, plant and equipment and
software
Acquisition of businesses, net of cash acquired
Purchase of investment in associates
Proceeds from disposal of businesses, net of tax paid of £5.9m
(2022: £27.9m)
Interest received
Net cash (used in)/inflow from investing activities
Cash flows used in financing activities
Interest paid on borrowings
Interest paid on lease liabilities
Dividends paid
Share buyback purchase of shares
Net proceeds from exercise of share options
Payments on principal portion of lease liabilities
Proceeds from borrowings
Repayment of borrowings
Net cash outflow used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
Note
25
2023
£m
245.5
(50.3)
195.2
2022
£m
166.8
(46.8)
120.0
(24.7)
(44.9)
23
12
24
16
8
21
16
16
16
15
3.1
(49.5)
(7.8)
3.3
5.4
(70.2)
(1.0)
(0.2)
(79.7)
(114.9)
0.6
(15.4)
–
(0.1)
(210.7)
(85.7)
228.1
(3.6)
138.8
13.4
(114.7)
(2.9)
365.4
1.9
218.2
(1.4)
(2.5)
(78.6)
(191.0)
0.2
(13.9)
326.2
(326.8)
(287.8)
50.4
167.8
9.9
228.1
1. Basis of preparation and summary of material accounting policies
a) Basis of preparation
Basis of accounting
The Consolidated Financial Statements have been prepared on a historical cost basis except for
items that are required by International Financial Reporting Standards (IFRS) to be measured
at fair value, principally certain financial instruments. The Consolidated Financial Statements
have been prepared in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006 and UK adopted IFRSs.
The Consolidated Financial Statements set out on pages 136 to 189 have been prepared
using consistent accounting policies. In the current year there are no new standards and
interpretations that have had a material impact on the Group’s Statement of Financial Position.
These Consolidated Financial Statements are presented in millions of Sterling rounded to the
nearest one decimal place.
Basis of consolidation
The Consolidated Financial Statements set out the Group’s financial position as at 31 December
2023 and the Group’s financial performance for the year ended 31 December 2023, which
incorporate the Financial Statements of Spectris plc and its subsidiaries and include its share
of the results of associates using the equity method of accounting. The Group recognises its
direct rights to (and its share of) jointly held assets, liabilities, revenues and expenses of joint
operations under the appropriate headings in the Consolidated Financial Statements.
i. Subsidiaries
A subsidiary is an entity that is controlled by another entity, known as the parent or investor
(such as the Group). An investor controls an investee when the investor is exposed, or has rights,
to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee.
The results of subsidiaries acquired or disposed of during the year are consolidated from and
up to the date of change of control. Where necessary, accounting policies of subsidiaries have
been aligned with the policies adopted by the Group. All intra-group transactions including any
gains or losses, balances, income or expenses are eliminated in full on consolidation.
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the
difference between the aggregate of the fair value of the consideration received and the
amount of the assets (including goodwill), and liabilities of the subsidiary and any non-
controlling interests.
All inter-company balances and transactions, including unrealised profits arising from intra-
group transactions, have been eliminated. Unrealised losses are eliminated in the same way
as unrealised gains except that they are only eliminated to the extent that there is no evidence
of impairment.
ii. Associates
An associate is an entity over which the Group has significant influence and that is neither a
subsidiary nor an interest in a joint venture. Significant influence is the power to participate in
the financial and operating policy decisions of the investee but is not control or joint control
over those policies. The results and assets and liabilities of associates are incorporated in these
financial statements using the equity method of accounting, except when the investment is
classified as held for sale, in which case it is accounted for in accordance with IFRS 5.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 140
1. Basis of preparation and summary of material accounting policies continued
Under the equity method, an investment in an associate is recognised initially in the
Consolidated Statement of Financial Position at cost and adjusted thereafter to recognise the
Group’s share of the profit or loss and other comprehensive income of the associate. When the
Group’s share of losses of an associate exceeds the Group’s interest in that associate, the Group
discontinues recognising its share of further losses. Additional losses are recognised only to the
extent that the Group has incurred legal or constructive obligations or made payments on
behalf of the associate or joint venture.
An investment in an associate is accounted for using the equity method from the date on
which the investee becomes an associate. On acquisition of the investment in an associate,
any excess of the cost of the investment over the Group’s share of the net fair value of the
identifiable assets and liabilities of the investee is recognised as goodwill, which is included
within the carrying amount of the investment. Any excess of the Group’s share of the net
fair value of the identifiable assets and liabilities over the cost of the investment, after
reassessment, is recognised immediately in profit or loss in the period in which the investment
is acquired.
The requirements of IAS 36 are applied to determine whether it is necessary to recognise any
impairment loss with respect to the Group’s investment in an associate. When necessary, the
entire carrying amount of the investment (including goodwill) is tested for impairment in
accordance with IAS 36 as a single asset by comparing its recoverable amount (higher of
value in use and fair value less costs of disposal) with its carrying amount. Any impairment
loss recognised is not allocated to any asset, including goodwill that forms part of the
carrying amount of the investment. Any reversal of that impairment loss is recognised in
accordance with IAS 36 to the extent that the recoverable amount of the investment
subsequently increases.
When a Group entity transacts with an associate of the Group, profits and losses resulting
from the transactions with the associate are recognised in the Group’s Consolidated Financial
Statements only to the extent of interests in the associate or joint venture that are not related
to the Group.
iii. Joint operations
Joint arrangements are contractual arrangements which the Group has entered into with one
or more parties to undertake an economic activity that is subject to joint control. Joint control
is the contractually agreed sharing of control over an economic activity and exists only when
decisions relating to the relevant activities require the unanimous consent of the parties
sharing the control. A joint operation is a joint arrangement whereby the parties that have joint
control of the arrangement have rights to the assets, and obligations for the liabilities, relating
to the arrangement. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities require unanimous
consent of the parties sharing control. As a result, the Group recognises its interest in the
joint operation, including its share of any assets, liabilities, revenue and expenses of the joint
operation. The Group accounts for the assets, liabilities, revenue and expenses relating to its
interest in a joint operation in accordance with the IFRS Standards applicable to the particular
assets, liabilities, revenue and expenses. When a Group entity transacts with a joint operation in
which a Group entity is a joint operator (such as a purchase of assets), the Group does not
recognise its share of the gains and losses until it resells those assets to a third party.
Going concern
In determining the basis of preparation for the Consolidated Financial Statements, the
Directors have considered the Group’s available resources, current business activities and
factors likely to impact on its future development and performance, including the impact of
current macroeconomic factors and Climate Change on the Group, which are described in
the Chief Executive’s Review, Financial Review and Operating Review.
The Group’s business activities, together with factors likely to affect its future development,
performance and financial position, are set out in the Strategic Report on pages 2 to 77. The
financial position of the Group, its cash flows, liquidity position and borrowing facilities are
described in the Financial Review on pages 40 to 43. In addition, note 26 to the Financial
Statements includes the Group’s objectives, policies and processes for managing its capital;
its financial risk management objectives; details of its financial instruments and hedging
activities; and its exposure to credit risk and liquidity risk.
The Group finances its operations from retained earnings and, where appropriate, from
third-party borrowings. Total borrowings as at 31 December 2023 were £nil (2022: £0.1m).
As at 31 December 2023, the Group had £393.1m of committed facilities, consisting entirely
of a $500m multi-currency revolving credit facility (RCF) maturing in July 2025. The RCF was
undrawn at 31 December 2023 (2022: undrawn).
The RCF has a leverage (covenant defined net debt/EBITDA) covenant of up to 3.5 times. The
Group regularly monitors its financial position to ensure that it remains within the terms of its
banking covenants. At 31 December 2023, there was net finance income for covenant purposes
of £3.9m, resulting in the interest cover ratio being n/a (31 December 2022: n/a). The minimum
covenant interest cover requirement is 3.75 times (covenant defined earnings before interest,
tax and amortisation divided by net finance charges). Leverage (covenant defined earnings
before interest, tax, depreciation, and amortisation divided by net cash) was less than zero
(31 December 2022: less than zero), due to the Group’s net cash position, against a maximum
permitted leverage of 3.5 times.
In addition to the above, after adjusting for £0.3m of cash and cash equivalents included in the
‘assets held for sale’ line of the Consolidated Statement of Financial Position, at 31 December
2023, the Group had a cash and cash equivalents balance of £138.5m. The Group also had
various uncommitted facilities and bank overdraft facilities available which were all undrawn,
resulting in a net cash position of £138.8m, including cash in ‘assets held for sale’, a decrease of
£89.2m from £228.0m at 31 December 2022.
The Group has prepared and reviewed cash flow forecasts for the period to 31 December 2028,
which reflect forecasted changes in revenue across its business and performed a reverse stress
test of the forecasts to determine the extent of downturn which would result in insufficient
liquidity or a breach of banking covenants. Revenue would have to reduce by 38% over the
period under review for the Group to breach covenants on its debt facility. The reverse stress
test does not take into account further mitigating actions which the Group would implement
in the event of a severe and extended revenue decline, such as cancelling the dividend or
reducing capital expenditure. This assessment indicates that the Group can operate within the
level of its current facilities, as set out above, without the need to obtain any new facilities for
a period of not less than 12 months from the date of this report.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 141
1. Basis of preparation and summary of material accounting policies continued
Following this assessment, the Board of Directors are satisfied that the Group has sufficient
resources to continue in operation for a period of not less than 12 months from the date of
this report. Accordingly, they continue to adopt the going concern basis in relation to this
conclusion and preparing the Consolidated Financial Statements. There are no key sensitivities
identified in relation to this conclusion. Further information on the going concern of the Group
can be found on page 51 in the Viability Statement.
Climate risks reflected in the Consolidated Financial Statements
The Consolidated Financial Statements have been prepared with full consideration of both
physical and transition risks resulting from climate change, our journey towards achieving our
Net Zero ambition and in accordance with our Task Force for Climate Change Related Financial
Disclosures (TCFD) report.
In conjunction with our Net Zero ambition and TCFD report a review has been performed in
the following areas that are deemed most at risk of being impacted by climate change:
Going concern – The Group has reviewed sensitivities to future cash flows and discount rates
aligned with our Principal Risks and uncertainties. The review covered sensitivities with respect
to potential loss of revenue, associated profits and cash flows due to Spectris, its customers
and/or its suppliers making different choices in the achievement of Net Zero objectives, the
potential impact that moving to a more sustainable supply chain may have on profits and cash
flows, and the cash flows of mitigating potential physical risks, such as potential site moves
resulting from increased water levels.
Intangible assets – The Group has assessed future economic benefits, predominantly
technology related to our product portfolio and the transition risk to our scope 1 and 2 Net Zero
ambitions. This incorporates any known change or potential change from our customers in our
scope 3 ambitions.
Property, plant and equipment, remeasurement of leases and intangible assets – The Group
has reviewed the useful economic life of these non-current assets with respect to the physical
risk of our sites resulting from flooding and the transition to carbon neutrality and has validated
that all property, plant and equipment, lease right-of-use assets and intangible assets have
been checked to ensure that useful economic lives are in line with current and foreseeable
transition plans.
Inventories and associated provision for obsolescence – The Group has performed reviews
taking into account the potential risks and subsequent impact of transitioning our product
range to the use of sustainable raw materials and having considered the support to our
customers and suppliers in achieving their scope 3 ambitions.
For all the aforementioned climate risks, the Group considers that it is too early to foresee any
adjustment to carrying value for the year ended 31 December 2023 and that the sensitivities
used to test going concern adequately cover foreseeable risks.
New standards and interpretations adopted
In the current year there are no new standards and interpretations that have had a material
impact on the Group’s Statement of Financial Position.
New accounting standards and interpretations not yet adopted
At the date of authorisation of these Consolidated Financial Statements, the Group has not
applied the following new and revised IFRS Standards that have been issued but are not
yet effective:
Amendments to IFRS 16
Amendments to IAS 7 and IFRS 17
Amendment to IAS 1
Amendments to IAS 1
Amendments to IAS 1
Amendments to IAS 21
IFRS S1 General Requirements for Disclosure of
Sustainability-related Financial Information
IFRS S2 – Climate-related Disclosures
Lease liability in a sale and leaseback
Supplier finance arrangements
Non-current liabilities with covenants
Classification of liabilities as current or non-current
Classification of liabilities as current or non-current –
Deferral of effective date
Lack of exchangeability
General requirements for disclosure of
Sustainability-related Financial Information
Climate-related disclosures
The Directors do not expect that the adoption of the IFRS Standards listed above will have a
material impact on the Consolidated Financial Statements of the Group in future periods.
Significant accounting judgements and estimates
In determining and applying accounting policies, judgement is often required where the
choice of specific policy, assumption or accounting estimate to be followed could materially
affect the reported amounts of assets, liabilities, income and expenses, should it be
determined that a different choice be more appropriate. Estimates and assumptions are
reviewed on an ongoing basis and are based on historical experience and various other factors
that are believed to be reasonable under the circumstances, including the impact current
macroeconomic factors and climate change on the Group.
Critical accounting judgements
There are no critical accounting judgements at 31 December 2023.
Key sources of estimation uncertainty
Management considers the following to be the sole key source of estimation uncertainty for
the Group at the end of the current reporting period due to the risk of causing a material
change to the carrying amount of assets and liabilities within the next year.
i) Retirement benefit plans
Accounting for retirement benefit plans under IAS 19 (revised) requires an assessment of the
future benefits payable in accordance with actuarial assumptions. The discount rate and rate of
retail price inflation (RPI) assumptions applied in the calculation of plan liabilities, which are set
out in note 19, represent a key source of estimation uncertainty for the Group. Details of the
related sensitivities are set out on page 167 and the accounting policies applied in respect of
retirement benefit plans are set out on page 146.
Climate change is referred to in the Risk Management and Sustainability sections of the
Strategic Report. Spectris is well placed to face this global challenge and, although we
acknowledge the risks to businesses and trade, we do not consider climate change creates any
further key sources of estimation uncertainty at this time.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 142
1. Basis of preparation and summary of material accounting policies continued
b) Summary of significant accounting policies
The accounting policies set out below have been applied consistently by Group entities to all
years presented in these Consolidated Financial Statements.
Business combinations and goodwill
Acquisitions of businesses are accounted for using the acquisition method. The consideration
transferred in a business combination is measured at fair value, which is calculated as the sum
of the acquisition-date fair values of assets transferred by the Group and the liabilities incurred
by the Group to the former owners of the acquiree. The identifiable assets acquired, and the
liabilities assumed are recognised at their fair value at the acquisition date.
Transaction costs on a business combination are expensed as incurred in the Consolidated
Income Statement and treated as an adjusting item for the purposes of alternative
performance measures (see appendix to the Consolidated Financial Statements).
Goodwill represents the excess of the fair value of the purchase consideration for the interests
in subsidiary undertakings over the net fair value to the Group of the identifiable assets,
liabilities and contingent liabilities acquired. Where the fair value of the Group’s share of
identifiable net assets acquired exceeds the fair value of the consideration, the difference is
recognised immediately in the Consolidated Income Statement. Contingent consideration is
initially recognised as a liability with changes to estimates of contingent consideration reflected
in operating profit unless they occur during the 12-month measurement period, in which
situation the amount of goodwill recognised on the acquisition is adjusted if they are the
result of obtaining additional information about facts and circumstances that existed at the
acquisition date. Adjustments to contingent consideration are treated as an adjusting item
for the purposes of alternative performance measures (see appendix to the Consolidated
Financial Statements).
Goodwill arising on the acquisition of a business is tested annually for impairment. Goodwill
is not amortised, and any impairment losses are not subsequently reversed. The net book
value of goodwill at the date of transition to IFRS has been treated as deemed cost. On the
subsequent disposal or discontinuance of a previously acquired business, the relevant goodwill
is dealt with in the Consolidated Income Statement except for the goodwill already charged
to reserves. Goodwill is allocated on acquisition to cash generating units (CGUs) that are
anticipated to benefit from the combination. Goodwill is tested for impairment by assessing
the recoverable amount of the CGU to which the goodwill relates and comparing it against the
net book value. This estimate of recoverable amount is determined annually and additionally
when there is an indication that a CGU may be impaired. The Group’s identified CGUs are
equivalent to or smaller than the reportable operating segments in note 2.
The estimate of recoverable amount requires significant assumptions to be made and is based
on a number of factors, such as the near-term business outlook for the CGU, including both its
operating profit and operating cash flow performance. Where the recoverable amount of the
CGU is less than the carrying amount, an impairment loss is recognised in the Consolidated
Income Statement. Where goodwill forms part of a CGU and part of the operation within that
unit is disposed of, the goodwill associated with the operation disposed of is included
in the carrying amount of the operation when determining the gain or loss on disposal.
Goodwill disposed of in this circumstance is measured on the basis of the relative values of
the operation disposed of and the portion of the CGU retained.
Intangible assets and amortisation
The cost of acquiring software (including associated implementation costs where applicable)
that is not specific to an item of property, plant and equipment is classified as an intangible
asset. The Group only capitalises costs relating to the configuration and customisation of SaaS
arrangements as intangible assets where control of the software exists.
Self-funded research and development costs are charged to the Consolidated Income
Statement in the year in which they are incurred, unless development expenditure meets
certain strict criteria for capitalisation. These criteria include demonstration of the technical
feasibility, intent of completing a new intangible asset that is separable, the ability to measure
reliably the expenditure attributable to the intangible asset during its development phase
and that the asset will generate probable future economic benefits. From the point where
expenditure meets the criteria, development costs are capitalised and amortised over the
useful economic lives of the assets to which they relate.
Intangible assets arising from a business combination that are separable from goodwill are
recognised initially at fair value at the date of acquisition. Other acquired intangible assets
(including software not specific to an item of property, plant and equipment) are initially
recognised at cost (plus any associated implementation costs where applicable).
Subsequent expenditure is capitalised only when it increases the future economic benefits,
otherwise it is expensed as incurred.
Amortisation of intangible assets is charged to administrative expenses in the Consolidated
Income Statement on a straight-line basis over the shorter of the estimated useful economic
life (determined on an asset-by-asset basis) or underlying contractual life. The estimated useful
life and amortisation method are reviewed at the end of each reporting period, with the effect
of any changes in estimate being accounted for on a prospective basis. The estimated useful
lives are as follows:
> software – three to seven years;
> patents, contractual rights and technology – up to 11 years, dependent upon the nature of the
underlying contractual right; and
> customer-related and trade names – three to 20 years, dependent upon the underlying
contractual arrangements and specific circumstances such as customer retention
experience.
An intangible asset is derecognised on disposal, or when no future economic benefits are
expected from use or disposal.
Property, plant and equipment and depreciation
Property, plant and equipment is stated at cost less accumulated depreciation and impairment
losses. The cost comprises the purchase price paid and any costs directly attributable to
bringing it into working condition for its intended use. Tangible assets arising from a business
combination are recognised initially at fair value at the date of acquisition.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 143
1. Basis of preparation and summary of material accounting policies continued
Depreciation is recognised in the Consolidated Income Statement on a straight-line basis to
write off the cost, less the estimated residual value (which is reviewed annually) of property,
plant and equipment over its estimated useful economic life. Depreciation commences on
the date the assets are available for use within the business and the asset carrying values
are reviewed for impairment when there is an indication that they may be impaired. The
depreciation charge is revised where useful lives are different from those previously estimated,
or where technically obsolete assets are required to be written down. Where parts of an item of
plant and equipment have separate lives, they are accounted for and depreciated as separate
items. Land is not depreciated. Estimated useful lives are as follows:
> freehold and long leasehold property – 20 to 40 years;
> short leasehold property – over the period of the lease; and
> plant and equipment – three to 20 years.
Borrowing costs directly attributable to the acquisition, construction or production of
qualifying assets that take a substantial period of time to get ready for their intended use are
capitalised as part of the cost of the respective asset.
Impairment of property, plant and equipment and intangible assets excluding goodwill
At each reporting date, the Group reviews the carrying amounts of its intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated to determine the
extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs of disposal and value in use. In
assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessment of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not
been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the
carrying amount of the asset is reduced to its recoverable amount. An impairment loss is
recognised immediately in profit or loss.
Leases
The Group assesses whether a contract is or contains a lease, at inception of the contract.
The Group recognises a right-of-use asset and a corresponding lease liability with respect to all
lease arrangements in which it is the lessee, except for short-term leases (defined as leases
with a lease term of 12 months or less) and leases of low value assets. For these leases, the
Group recognises the lease payments as an operating expense on a straight-line basis over the
term of the lease.
The lease liability is initially measured at the present value of the lease payments that are not
paid at the commencement date, discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the Group uses its incremental borrowing rate. Lease payments
included in the measurement of the lease liability comprise: fixed lease payments (including in
substance fixed payments), less any lease incentives; variable lease payments that depend on
an index or rate, initially measured using the index or rate at the commencement date; the
amount expected to be payable by the lessee under residual value guarantees; the exercise
price of purchase options, if the lessee is reasonably certain to exercise the options; and
payments of penalties for terminating the lease, if the lease term reflects the exercise of an
option to terminate the lease. The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability (using the effective interest method)
and by reducing the carrying amount to reflect the lease payments made. The lease liability is
presented as a separate line in the Consolidated Statement of Financial Position.
The right-of-use assets comprise the initial measurement of the corresponding lease liability,
lease payments made at or before the commencement day and any initial direct costs. They
are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the
underlying asset. Whenever the Group incurs an obligation for costs to dismantle and remove
a leased asset, restore the site on which it is located or restore the underlying asset to the
condition required by the terms and conditions of the lease, a provision is recognised and
measured under IAS 37. The right-of-use assets are presented as a separate line in the
Consolidated Statement of Financial Position.
The Group remeasures the lease liability (and makes a corresponding adjustment to the
related right-of-use asset) whenever: the lease term has changed or there is a change in the
assessment of exercise of a purchase option, in which case the lease liability is re-measured by
discounting the revised lease payments using a revised discount rate; the lease payments
change due to changes in an index or rate or a change in expected payment under a
guaranteed residual value, in which case the lease liability is re-measured by discounting the
revised lease payments using the initial discount rate; or a lease contract is modified, in which
case the lease liability is re-measured by discounting the revised lease payments using a
revised discount rate.
The interest portion of lease payments is presented under financing activities in the
Consolidated Statement of Cash Flows.
Inventories
Inventories and work in progress are carried at the lower of cost and net realisable value.
Inventory acquired as part of business combinations is valued at fair value less cost to sell.
Cost represents direct costs incurred and, where appropriate, production or conversion costs
and other costs to bring the inventory to its existing location and condition. In the case of
manufacturing inventory and work in progress, cost includes an appropriate share of
production overheads based on normal operating capacity. Inventory is accounted for on a
first-in, first-out basis or, in some cases, a weighted-average basis, if deemed more appropriate
for the business. Provisions are made to write down slow-moving, excess and obsolete items to
net realisable value, based on an assessment of technological and market developments and
on an analysis of historical and projected usage with regard to quantities on hand.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 144
1. Basis of preparation and summary of material accounting policies continued
Trade and other receivables
Trade and other receivables are carried at original invoice amount (which is considered a
reasonable proxy for fair value) and are subsequently held at amortised cost less provision for
impairment. The provision for impairment of receivables is based on lifetime expected credit
losses. Lifetime expected credit losses are calculated by assessing historical credit loss
experience, adjusted for factors specific to the receivable and operating company. The
movement in the provision is recognised in the Consolidated Income Statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and short-term deposits
held on call or with maturities of less than three months at inception. Bank overdrafts that
are repayable on demand and form an integral part of the Group’s cash management are
included as a component of cash equivalents for the purposes of the Consolidated Statement
of Cash Flows.
Assets and liabilities held for sale
Assets, liabilities and disposal groups classified as held for sale are measured at the lower of
carrying amount and fair value less costs to sell.
Assets, liabilities and disposal groups are classified as held for sale if their carrying amount will
be recovered principally through a sale transaction rather than continuing use. This condition is
regarded as met only when the sale is highly probable, and the asset (or disposal group) is
available for immediate sale in its present condition and when management is committed to
the sale which is expected to qualify for recognition as a completed sale within one year from
the date of classification.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all the
assets and liabilities of that subsidiary are classified as held for sale when the criteria described
above are met, regardless of whether the Group will retain a non-controlling interest in its
former subsidiary after the sale.
When the Group is committed to a sale plan involving disposal of an investment in an associate
or a portion of an investment in an associate, the investment, or the portion of the investment
in the associate, that will be disposed of is classified as held for sale when the criteria described
above are met. The Group then ceases to apply the equity method in relation to the portion
that is classified as held for sale. Any retained portion of an investment in an associate that has
not been classified as held for sale continues to be accounted for using the equity method.
Trade and other payables
Trade and other payables principally comprise amounts outstanding for trade purchases and
ongoing costs. These are recognised at the amounts expected to be paid to counterparties and
subsequently held at amortised cost.
Provisions
A provision is recognised in the Consolidated Statement of Financial Position when the Group
has a present legal or constructive obligation as a result of a past event and it is probable that
an outflow of resources, that can be reliably measured, will be required to settle the obligation.
In respect of warranties, a provision is recognised when the underlying products or services are
sold. Provisions are recognised at an amount equal to the best estimate of the expenditure
required to settle the Group’s liability. A contingent liability is disclosed where the existence of
the obligation will only be confirmed by future events or where the amount of the obligation
cannot be measured with reasonable reliability. Contingent assets are not recognised but are
disclosed where an inflow of economic benefit is probable. Obligations arising from
restructuring plans are recognised when detailed formal plans have been established and
when there is a valid expectation that such a plan will be carried out.
Taxation
The Group has adopted the amendments to IAS 12 for the first time in the current year. The
International Accounting Standards Board (IASB) amended the scope of IAS 12 to clarify that
the Standard applies to income taxes arising from tax law enacted or substantively enacted to
implement the Pillar Two model rules published by the Organisation for Economic Co-
operation and Development (OECD), including tax law that implements qualified domestic
minimum top up taxes described in those rules. The amendments introduce a temporary
exception, which the Group has applied, to the accounting requirements for deferred taxes in
IAS 12, so that an entity would neither recognise nor disclose information about deferred tax
assets and liabilities related to Pillar Two income taxes.
Following the amendments, the Group will be required to disclose that it has applied the
exception and to disclose separately its current tax expense (income) related to Pillar Two
income taxes.
Tax on the profit or loss for the year comprises both current and deferred tax. Tax is recognised
in the Consolidated Income Statement, except to the extent that it relates to items recognised
either in other comprehensive income or directly in equity, in which case tax is recognised in
the Consolidated Statement of Comprehensive Income or the Consolidated Statement of
Changes in Equity, respectively.
Current tax is the expected tax payable on the taxable income for the year, using tax rates
enacted or substantively enacted at the Statement of Financial Position date, and any
adjustments to tax payable in respect of prior years. Tax positions are reviewed to assess
whether a provision should be made based on prevailing circumstances. Tax provisions are
included within current taxation liabilities.
Deferred taxation is provided on taxable temporary differences between the carrying amounts
of assets and liabilities in the Financial Statements and their corresponding tax bases. No
provision is made for deferred tax which would become payable on the distribution of retained
profits by overseas subsidiaries where the timing of the reversal of the temporary difference
can be controlled and it is probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax is measured using the tax rates expected to apply when the
asset is realised, or the liability settled based on tax rates enacted or substantively enacted at
the Consolidated Statement of Financial Position date.
Deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition
of an asset or liability unless the related transaction is a business combination or affects tax or
accounting profit.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 145
1. Basis of preparation and summary of material accounting policies continued
A deferred tax asset is recognised only to the extent that it is probable that future taxable
profits will be available against which the asset can be utilised. Deferred tax assets are reduced
to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity
and the same taxation authority.
Additional income taxes that arise from the distribution of intra-group dividends are
recognised at the same time as the liability to pay the related dividend.
Foreign currency translation
The functional currency for each entity in the Group is determined with reference to the
currency of the primary economic environment in which it operates. Transactions in currencies
other than the functional currency are initially recorded at the functional currency rate ruling at
the date of the transaction. Monetary assets and liabilities denominated in foreign currencies
are retranslated at the rate of exchange ruling at the Consolidated Statement of Financial
Position date. Exchange gains and losses on settlement of foreign currency transactions are
determined using the rate prevailing at the date of the transactions, or the translation of
monetary assets and liabilities at period end exchange rates and are charged/credited to the
Consolidated Income Statement. Non-monetary assets and liabilities denominated in foreign
currencies that are stated at historical cost are translated to the functional currency at the
foreign exchange rate ruling at the date of the transaction.
On consolidation, the Income Statement items of subsidiaries are translated into Sterling at
average rates of exchange. Statement of Financial Position items are translated into Sterling at
year-end exchange rates. Exchange differences on the retranslation are taken to the translation
reserve within equity. Exchange differences on foreign currency borrowings designated as a
hedge of the net investment in a foreign operation are reported in the Consolidated Statement
of Comprehensive Income. All other exchange differences are charged or credited to the
Consolidated Income Statement in the year in which they arise. On disposal of an overseas
subsidiary, any cumulative exchange movements relating to that subsidiary held in the
translation reserve are transferred to the Consolidated Income Statement.
Derivative financial instruments may be purchased to hedge the Group’s exposure to changes
in foreign exchange rates. The accounting policies applied in these circumstances are
described below.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as
assets and liabilities of the foreign entity and translated at the closing rate. Exchange
differences arising are recognised in other comprehensive income.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at the fair value of consideration received
less directly attributable transaction costs. Subsequent to initial recognition, interest-bearing
borrowings are measured at amortised cost with any difference between cost and redemption
value being recognised in the Consolidated Income Statement over the period of the
borrowings on an effective-interest basis.
Finance costs and financial income
Finance costs comprise the interest payable on borrowings calculated using the effective
interest method, the unwinding of discount factor on lease liabilities and the unwinding of the
discount factor on deferred or contingent consideration. Financial income comprises interest
income on cash and invested funds, and is recognised in the Consolidated Income Statement
as it accrues. The net gain or loss on retranslation of short-term inter-company loan balances is
also presented within net finance costs.
Financial instruments
Recognition
The Group recognises financial assets and liabilities on its Consolidated Statement of Financial
Position when it becomes a party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, and the net amount is reported in the Consolidated
Statement of Financial Position when there is a legally enforceable right to set off the
recognised amounts and there is an intention to settle on a net basis or realise the asset and
settle the liability simultaneously.
Measurement
When financial assets and liabilities are initially recognised, they are measured at fair value,
being the consideration given or received plus directly attributable transaction costs. In
determining estimated fair value, investments are valued at quoted bid prices on the trade
date. When quoted prices on an active market are not available, fair value is determined by
reference to price quotations for similar instruments traded. In determining fair value for
deferred contingent consideration, the fair value is determined by reference to best estimates
of the likely outcome.
Originated loans and receivables are initially recognised in accordance with the policy stated
above and subsequently re-measured at amortised cost using the effective-interest method.
Allowance for impairment is estimated on a case-by-case basis.
The Group uses derivative financial instruments such as forward foreign exchange contracts to
hedge risks associated with foreign exchange fluctuations. These are designated as cash flow
hedges. At the inception of the hedge relationship, the Group documents the relationship
between the hedging instrument and the hedged item, along with its risk management
objectives and its strategy for undertaking various hedge transactions. Furthermore, at the
inception of the hedge and on an ongoing basis, the Group documents whether the hedging
instrument that is used in a hedging relationship is highly effective in offsetting changes in
cash flows of the hedged item.
The effective portion of changes in the fair value of derivatives that are designated and qualify
as cash flow hedges is deferred in equity. The gain or loss relating to the ineffective portion is
recognised immediately in the Consolidated Income Statement.
Amounts deferred in equity are reclassified to the Consolidated Income Statement in the
periods when the hedged item is recognised in the Consolidated Income Statement, in the
same line of the Consolidated Income Statement as the recognised hedged item. However,
when the forecast transaction that is hedged results in the recognition of a non-financial asset
or a non-financial liability, the gains and losses previously deferred in equity are transferred
from equity and included in the initial measurement of the cost of the asset or liability.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 146
1. Basis of preparation and summary of material accounting policies continued
When hedge accounting is discontinued any cumulative gain or loss deferred in equity at
that time remains in equity and is recognised when the forecast transaction is ultimately
recognised in the Consolidated Income Statement. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was deferred in equity is recognised
immediately in the Consolidated Income Statement.
Derecognition
A financial asset is derecognised when the Group loses control over the contractual rights to
the cash flows from the asset. This occurs when the rights are realised, expire or are
surrendered. A financial liability is derecognised when the obligation specified in the contract
is discharged, cancelled or expired. Originated loans and receivables are derecognised on the
date they are transferred by the Group.
Impairment of financial assets
The Group assesses at each Consolidated Statement of Financial Position reporting date
whether there is any objective evidence that a financial asset, or group of financial assets, is
impaired. A financial asset, or group of financial assets, is deemed to be impaired if, and only if,
there is objective evidence of impairment as a result of one or more events that has occurred
after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an
impact on the estimated future cash flows of the financial asset or group of financial assets
that can be reliably estimated. For trade receivables, the Group recognises impairment
provisions based on lifetime expected credit losses.
Employee benefits
The Group operates defined benefit post-retirement benefit plans and defined contribution
pension plans.
Investments in debt instruments
The Group’s investment in debt instruments consists of a Vendor Loan Note Receivable. The
Vendor Loan Note Receivable was initially recognised at fair value, being the consideration
received. The Vendor Loan Note Receivable is measured at fair value at the end of each
reporting period, with any fair value gains or losses recognised in profit or loss.
Investments in equity instruments classified as fair value through other comprehensive
income
On initial recognition, the Group may make an irrevocable election (on an instrument-by-
instrument basis) to designate investments in equity instruments as at fair value through other
comprehensive income. Designation at fair value through other comprehensive income is not
permitted if the equity investment is held for trading or if it is contingent consideration
recognised by an acquirer in a business combination.
An investment in equity instruments is held for trading if:
it has been acquired principally for the purpose of selling it in the near term; or
•
• on initial recognition it is part of a portfolio of identified financial instruments that the Group
manages together and has evidence of a recent actual pattern of short-term profit-taking; or
it is a derivative (except for a derivative that is a financial guarantee contract or a designated
and effective hedging instrument).
•
Investments in equity instruments at fair value through other comprehensive income are
initially measured at fair value plus transaction costs.
Subsequently, they are measured at fair value with gains and losses arising from changes in fair
value recognised in other comprehensive income and accumulated in the retained earnings
reserve. The cumulative gain or loss is not reclassified to profit or loss on disposal of the equity
investments, instead, it is transferred to retained earnings.
Dividends from investments in equity instruments designated as at fair value through other
comprehensive income are recognised in profit and loss in accordance with IFRS 9 unless the
dividends clearly represent a recovery of part of the cost of the investment.
Defined benefit plans
The Group’s net obligation recognised in the Consolidated Statement of Financial Position
in respect of defined benefit plans is calculated separately for each plan as the present value
of the plan’s liabilities less the fair value of the plan’s assets. The operating and financing
costs of defined benefit plans are recognised separately in the Consolidated Income
Statement. Operating costs comprise the current service cost, plan administrative expense,
any gains or losses on settlement or curtailments, and past service costs where benefits have
vested. Finance items comprise the unwinding of the discount on the net asset surplus/deficit.
Actuarial gains or losses comprising changes in plans’ liabilities due to experience and
changes in actuarial assumptions are recognised in the Consolidated Statement of
Comprehensive Income.
The amount of any pension fund asset recognised in the Consolidated Statement of Financial
Position is limited to any future refunds from the plan or the present value of reductions in
future contributions to the plan.
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays
fixed contributions into a separate entity and will have no legal or constructive obligation to
pay further amounts. Obligations for contributions to defined contribution pension plans are
recognised in the Consolidated Income Statement in the periods during which services are
rendered by employees.
In certain countries, the Group participates in industry-wide defined benefit-type pension
arrangements. In such circumstances, it is not possible to determine the amount of any
surplus or deficit attributable to the Group and the pension costs are accounted for as if the
arrangements were defined contribution plans. These are not material to the Group and,
accordingly, no additional disclosures are provided.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 147
Further details of the nature of each major revenue stream are provided in the following
section.
Spectris Scientific
Revenue from the provision of services, including ongoing support, servicing and maintenance,
is recognised in line with the delivery of the service, either at a point in time or, for some
ongoing services, over time when the performance obligation is satisfied.
Revenue from the sale of goods, where the goods are not required to be installed, is recognised
at a point in time when control of the goods has transferred. This may occur, depending on the
individual customer terms, when the product is transferred to a freight carrier, or when the
customer has received the product.
For contracts where the sale of goods is combined with a complex installation, revenue is
recognised at a point in time when installation is complete as the installation is not distinct,
since the customer would not expect it to be readily available.
Occasionally, the initial contract covers both the supply of goods and ongoing support,
servicing, and maintenance. For such contracts, revenue is allocated across each of the
individual components in line with their relative price and value of the performance obligation
and each element is accounted for as described above.
Payment is normally due at the point that the performance obligation is completed. For
some of the segment’s business, the customer may make partial payment in advance.
Such payments are recognised as contract liabilities until the performance obligation has
been satisfied.
Sales-related warranties associated with the products cannot be purchased separately and
they serve as an assurance that the products sold comply with agreed-upon specifications.
These are accounted for under IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’
in note 18.
1. Basis of preparation and summary of material accounting policies continued
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are
expensed as the related service is provided. A liability is recognised for the amount expected to
be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or
constructive obligation to pay this amount as a result of past service provided by the employee,
and the obligation can be estimated reliably.
Share-based payments
Certain employees of the Group receive part of their remuneration in the form of share-based
payment transactions, whereby employees render services in exchange for shares or rights
over shares (equity-settled transactions). The cost of equity-settled transactions with
employees is measured at fair value at the date at which they are granted. The fair value of
share awards with market-related vesting conditions is determined by an external consultant
and the fair value at the grant date is expensed on a straight-line basis over the vesting period
based on the Group’s estimate of shares that will eventually vest. The estimate of the number of
awards likely to vest is reviewed at each Consolidated Statement of Financial Position reporting
date up to the vesting date, at which point the estimate is adjusted to reflect the actual
outcome of awards which have vested. No adjustment is made to the fair value after the
vesting date even if the awards are forfeited or not exercised.
Where it is not possible to incentivise managers of the Group’s platforms/operating companies
with equity-settled options, they are issued with cash-settled options. A liability is recognised
for the services acquired, measured initially at the fair value of the liability. The charge for these
awards is adjusted at each reporting date, with any changes in fair value recognised in profit or
loss, to reflect the expected and actual levels of options that vest, and the fair value is based on
either the share price at date of exercise or the share price at the Consolidated Statement of
Financial Position date if sooner.
Own shares
Own equity instruments which are re-acquired (own shares) are recognised at cost and
deducted from equity. No gain or loss is recognised in the Consolidated Income Statement on
the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference
between the carrying amount and the consideration paid to acquire such equity instruments
is recognised within equity.
Dividends
Dividends are recognised as a liability in the period in which they are approved by shareholders.
Revenue
Revenue is measured based on the fair value of the consideration specified in a contract with a
customer, net of returns and discounts, and excludes amounts collected on behalf of third
parties, value added tax and other sales-related taxes. The Group recognises revenue when it
transfers control of a product or service to a customer.
The Group’s major revenue streams are the same as its reportable operating segments
(Spectris Scientific, Spectris Dynamics, and Other non-reportable segments).
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 148
1. Basis of preparation and summary of material accounting policies continued
Spectris Dynamics
Revenue from the provision of services, including ongoing support, servicing and maintenance,
is recognised in line with the delivery of the service, either at a point in time or, for some
ongoing services, over time when the performance obligation is satisfied.
Revenue from the sale of goods, where the goods are not required to be installed, is recognised
at a point in time when control of the goods has transferred. This may occur, depending on the
individual customer terms, when the product is transferred to a freight carrier, or when the
customer has received the product.
Contracts where the sale of goods are combined with a simple installation are those which the
customer perceives as a separate performance obligation within the overall contract to deliver
goods. Revenue is recognised for these installations separately from the delivery of goods, and
only at a point in time when the installation has occurred.
Occasionally, the initial contract covers both the supply of goods and ongoing support,
servicing and maintenance. For such contracts revenue is allocated across each of the
individual components in line with their relative price and value of the performance obligation
and each element is accounted for as described above.
Payment is normally due at the point that the performance obligation is completed. For
some of the segment’s business the customer may make partial payment in advance.
Such payments are recognised as contract liabilities until the performance obligation has
been satisfied.
Sales-related warranties associated with the products cannot be purchased separately and
they serve as an assurance that the products sold comply with agreed-upon specifications.
These are accounted for under IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’
in note 18.
Other
Revenue from the sale of goods, where the goods are not required to be installed, is recognised
at a point in time when control of the goods has transferred. This may occur, depending on the
individual customer terms, when the product is transferred to a freight carrier, or when the
customer has received the product.
Occasionally, the initial contract covers both the supply of goods and ongoing support,
servicing and maintenance. For such contracts, revenue is allocated across each of the
individual components in line with their relative price and value of the performance obligation
and each element is accounted for as described above.
Payment is normally due at the point that the performance obligation is completed. For
some of the segment’s business, the customer may make partial payment in advance.
Such payments are recognised as contract liabilities until the performance obligation has
been satisfied.
Sales-related warranties associated with the products cannot be purchased separately and
they serve as an assurance that the products sold comply with agreed-upon specifications.
These are accounted for under IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’
in note 18.
2. Operating segments
The Group’s reportable segments are described below. The segmental divisional structure
reflects the current internal reporting provided to the Chief Operating Decision Maker
(considered to be the Board) on a regular basis to assist in making decisions on capital
allocated to each segment and to assess performance. The segment results include an
allocation of head office expenses, where the costs are attributable to a segment. Costs of
running the PLC are reported separately as Group costs.
The following summarises the operations in each of the Group’s reportable segments:
• Spectris Scientific provides advanced measurement and materials characterisation,
accelerating innovation and efficiency in R&D and manufacturing. The operating companies
in this segment are Malvern Panalytical and Particle Measuring Systems;
• Spectris Dynamics provides differentiated sensing, data acquisition, analysis modelling and
simulation solutions to help customers accelerate product development and enhance
product performance;
• the Other non-reportable segments are a portfolio of high-value precision in-line sensing
and monitoring businesses. The operating companies in this segment in are Red Lion
Controls and Servomex; and
• Group costs consist of costs of running the PLC.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 149
Spectris Scientific
Spectris Dynamics
Other
Group-related
Total segment assets and liabilities
Cash and borrowings
Derivative financial instruments
Assets and liabilities held for sale that are not allocable
to a segment
Investment in debt instruments
Investment in equity instruments
Retirement benefit assets and liabilities
Taxation
Consolidated total assets and liabilities
Carrying amount of
segment assets
Carrying amount of
segment liabilities
2023
£m
655.0
746.8
188.3
0.4
1,590.5
138.5
6.2
0.3
21.7
24.3
2.4
33.8
1,817.7
2022
£m
673.8
766.1
202.7
2.6
1,645.2
228.1
1.7
–
18.9
29.3
–
24.8
1,948.0
2023
£m
(217.6)
(210.4)
(32.5)
(8.9)
(469.4)
–
(0.2)
(6.7)
–
–
(11.6)
(13.9)
(501.8)
2022
£m
(237.7)
(193.5)
(31.9)
(6.7)
(469.8)
(0.1)
(2.5)
–
–
–
(8.9)
(29.8)
(511.1)
Segment assets comprise: goodwill, other intangible assets, property, plant and equipment,
right-of-use assets, inventories and trade and other receivables, investments in associates and
assets held for sale that are attributable to the reported operating segment. Segment liabilities
comprise: trade and other payables, provisions, lease liabilities and other payables which can
be reasonably attributed to the reported operating segment. Unallocated items represent all
components of net cash, derivative financial instruments, assets held for sale that are not
allocable to a segment, investment in debt instruments, investment in equity instruments,
retirement benefit assets and liabilities and current and deferred taxation balances.
(4.1)
0.3
1.9
(19.2)
151.5
(36.7)
114.8
Spectris Scientific
Spectris Dynamics
Omega
Others
Group-related
Consolidated total
Additions to non-current
assets from continuing
and non-continuing
operations
2023
£m
45.7
45.7
–
5.0
–
96.4
2022
£m
68.9
85.7
0.7
18.0
0.6
173.9
Depreciation,
amortisation and
impairment from
continuing and
non-continuing
operations
2023
£m
18.5
30.8
–
7.9
0.5
57.7
2022
£m
23.9
27.9
–
6.9
0.6
59.3
2. Operating segments continued
Further details of the nature of these segments and the products and services they provide are
contained in the Strategic Report on pages 2 to 79.
Spectris
Scientific
£m
Spectris
Dynamics
£m
704.4
(0.2)
704.2
124.4
(0.4)
542.8
–
542.8
56.2
0.3
Other
£m
202.2
–
202.2
33.2
–
Group
costs1
£m
–
–
–
(25.2)
–
2023
Total
£m
1,449.4
(0.2)
1,449.2
188.6
(0.1)
2.8
(12.6)
11.0
(4.1)
185.6
(40.2)
145.4
Spectris
Scientific
£m
Spectris
Dynamics
£m
658.0
(0.2)
657.8
492.4
(0.2)
492.2
Other
£m
177.4
–
177.4
Group
costs1
£m
–
–
–
2022
Total
£m
1,327.8
(0.4)
1,327.4
118.3
46.5
26.2
(18.4)
172.6
Information about continuing reportable
segments
Segment revenues
Inter-segment revenue
External revenue
Operating profit
Share of post-tax results of associates
Fair value through profit and loss
movements on debt investments1
Loss on disposal of businesses1
Financial income1
Finance costs1
Profit before tax1
Taxation charge1
Profit after tax from continuing operations1
1. Not allocated to reportable segments.
Information about continuing reportable
segments
Segment revenues
Inter-segment revenue
External revenue
Operating profit
Fair value through profit and loss
movements on debt investments1
Profit on disposal of businesses1
Financial income1
Finance costs1
Profit before tax1
Taxation charge1
Profit after tax from continuing operations1
1. Not allocated to reportable segments.
Reportable segment profit is consistent with that presented to the Chief Operating Decision
Maker. Inter-segment revenue includes the movements in internal cash flow hedges with
inter-segment pricing on an arm’s-length basis. Segments are presented on the basis of actual
inter-segment charges made.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 150
2. Operating segments continued
Geographical segments
The Group’s operating segments are each located in several geographical locations and sell on
to external customers in all parts of the world. No individual country amounts to more than 3%
of revenue, other than those noted below. The following is an analysis of revenue from
continuing operations by geographical destination.
UK
Germany
France
Rest of Europe
USA
Rest of North America
Japan
China
South Korea
Rest of Asia
Rest of the world
UK
Germany
France
Rest of Europe
USA
Rest of North America
Japan
China
South Korea
Rest of Asia
Rest of the world
Spectris
Scientific
£m
Spectris
Dynamics
£m
27.8
31.6
20.5
96.0
133.6
21.7
41.3
149.5
36.6
98.7
46.9
704.2
21.8
103.7
27.0
86.8
145.7
7.6
30.1
73.9
11.2
22.8
12.2
542.8
Spectris
Scientific
£m
Spectris
Dynamics
£m
27.8
31.5
18.2
87.8
137.1
16.6
36.6
132.4
42.5
85.0
42.3
657.8
18.5
85.4
22.7
72.6
133.1
6.7
29.9
74.8
10.6
25.8
12.1
492.2
Other
£m
6.5
6.3
3.6
14.5
98.2
7.8
6.9
26.4
4.7
21.2
6.1
202.2
Other
£m
4.9
6.5
3.9
12.0
89.7
6.7
3.0
26.4
5.3
14.7
4.3
177.4
2023
Total
£m
56.1
141.6
51.1
197.3
377.5
37.1
78.3
249.8
52.5
142.7
65.2
1,449.2
2022
Total
£m
51.2
123.4
44.8
172.4
359.9
30.0
69.5
233.6
58.4
125.5
58.7
1,327.4
UK
Germany
France
Rest of Europe1
USA
Rest of North America
Japan
China
South Korea
Rest of Asia
Rest of the world
Deferred tax assets2
Total non-current assets
Non-current assets
2023
£m
218.8
70.5
7.1
301.2
355.1
13.2
4.7
9.7
0.9
8.3
2.9
992.4
26.6
1,019.0
2022
£m
239.3
86.8
7.0
283.4
406.4
16.0
5.3
9.7
1.2
8.6
2.6
1,066.3
16.2
1,082.5
1. Principally in Switzerland, Netherlands and Denmark (2022: Switzerland, Netherlands and Denmark).
2. Not allocated to reportable geographic area in reporting to the Chief Operating Decision Maker.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 151
3. Revenue
Disaggregation of revenue
The Group derives its revenue from the provision of goods and services both at a point in time
and over time. Product lines are presented consistent with the revenue information that is
disclosed for each reportable segment under IFRS 8 (see note 2).
IFRS 15, paragraph 114, requires an entity to disaggregate revenue recognised from contracts
with customers into categories that depict how the nature, amount, timing and uncertainty of
revenue and cash flows are affected by economic factors. This disaggregation will depend on
the entity’s individual facts and circumstances. The Group has assessed that the
disaggregation of revenue by reportable operating segments is appropriate in meeting this
disclosure requirement as this is the information regularly reviewed by the Chief Operating
Decision Maker in order to evaluate the financial performance of the entity. The Group also
believes that presenting a disaggregation of revenue based on the timing of transfer of goods
or services provides users of the Financial Statements with useful information as to the nature
and timing of revenue from contracts with customers.
Timing of revenue recognition from continuing operations
At a point in time:
Spectris Scientific
Spectris Dynamics
Others
Over time:
Spectris Scientific
Spectris Dynamics
Revenue from continuing operations
2023
£m
2022
£m
642.4
483.4
202.2
1,328.0
61.8
59.4
121.2
1,449.2
577.6
432.1
177.4
1,187.1
80.2
60.1
140.3
1,327.4
The Group’s material revenue streams have an expected duration of one year or less. The Group
has therefore applied the practical expedient in IFRS 15, paragraph 121, to not disclose
information about its remaining performance obligations.
No individual customer accounted for more than 1% of external revenue in 2023 (2022: 1%).
Total revenue for the Group from continuing operations, after including financial income of
£11.0m (2022: £1.9m) (see note 6), was £1,460.2m (2022: £1,329.3m).
4. Operating profit
Operating profit from continuing operations is stated after charging/(crediting):
Net foreign exchange losses/(gains) included in operating profit
Research and development expense
Amortisation and other non-cash adjustments made to intangible assets
Depreciation of owned property, plant and equipment
Depreciation and impairment of right-of-use assets
Income from sub-leasing right-of-use assets
Expenses relating to short-term and low-value leases
Donations to the Spectris Foundation
Cost of inventories recognised as expense
Profit on disposal and re-measurements of property, plant and equipment
and associated lease liabilities
Note
10
11
11
2023
£m
5.8
108.4
24.9
19.4
13.4
(0.5)
0.1
1.1
361.2
2022
£m
(0.3)
102.9
25.1
20.0
14.0
(0.3)
0.1
0.1
351.9
(0.5)
(1.5)
The Group’s operating profit in the current year includes £1.6m spend on climate-related
transition risk activities. These costs include all the activities disclosed in the Sustainability
section of the Strategic Report.
Auditor’s remuneration
Fees payable to the Company’s auditor for audit of the Company’s annual accounts
Fees payable to the Company’s auditor for the audit of the Company’s subsidiaries,
pursuant to legislation
Total audit-related fees
Fees payable to the Company’s auditor for other services:
– audit-related assurance services 1
– other non-audit services 2
2023
£m
0.8
1.7
2.5
0.1
0.1
2.7
2022
£m
0.7
1.7
2.4
0.1
0.2
2.7
1. Review of the half-year Financial Statements.
2. Assurance work over ESG disclosures.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 152
5. Employee costs and other information
Employee costs, including Directors’ remuneration, comprise:
Wages and salaries
Social security costs
Defined benefit pension plans:
– current service cost (see note 19)
– past service credit (see note 19)
Defined contribution pension plans
Equity-settled share-based payment expense
Cash-settled share-based payment expense
Average number of employees
Production and engineering
Sales, marketing and service
Administrative
Directors’ remuneration
Short-term benefits
Equity-settled share-based payment expense
Continuing operations
Total continuing and
discontinued operations
2023
£m
453.0
78.5
0.7
(0.1)
22.9
13.1
1.1
569.2
2022
£m
414.4
68.3
0.4
(0.1)
20.0
10.1
0.9
514.0
2023
£m
453.0
78.5
0.7
(0.1)
22.9
13.1
1.1
569.2
2022
£m
433.0
72.6
0.4
(0.1)
20.1
10.3
0.8
537.1
6. Financial income and finance costs
Financial income from continuing operations
Interest receivable
Net gain on retranslation of short-term inter-company loan balances
Finance costs from continuing operations
Interest payable on loans and overdrafts
Net loss on retranslation of short-term inter-company loan balances
Unwinding of discount factor on lease liabilities
Net interest cost on pension plan obligations
2023
£m
(5.3)
(5.7)
(11.0)
2023
£m
1.4
–
2.4
0.3
4.1
2022
£m
(1.9)
–
(1.9)
2022
£m
1.8
14.6
2.5
0.3
19.2
Net finance (credit)/costs from continuing operations
(6.9)
17.3
Continuing operations
Total continuing and
discontinued operations
2023
Number
2022
Number
2023
Number
2022
Number
Net interest credit of £3.9m (2022: credit of £0.1m), for the purposes of the calculation of interest
cover, comprises interest receivable of £5.3m (2022: £1.9m) and interest payable on loans and
overdrafts of £1.4m (2022: £1.8m).
The net finance credit of £6.9m (2022: £17.3m charge) includes £5.7m of unrealised gains on
inter-company loan balances (2022: losses of £14.6m).
3,569
2,767
930
7,266
3,642
2,764
870
7,276
3,569
2,767
930
7,266
2023
£m
3.1
2.0
5.1
3,844
2,860
900
7,604
2022
£m
2.8
1.6
4.4
Further details of Directors’ remuneration and share options are given in the Directors’
Remuneration Report on pages 102 to 123.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 7. Taxation
Current tax charge
Adjustments in respect of
current tax of prior years
Deferred tax – origination and
reversal of temporary
differences (note 20)
Taxation charge from
continuing operations
UK
£m
5.3
Overseas
£m
54.3
2023
Total
£m
59.6
Overseas
£m
2022
Total
£m
41.2
46.0
UK
£m
4.8
(0.5)
(0.3)
(0.8)
(1.4)
(1.4)
(2.8)
(1.9)
(16.7)
(18.6)
(1.3)
(5.2)
(6.5)
2.9
37.3
40.2
2.1
34.6
36.7
The standard rate of corporation tax for the year, based on the weighted average of tax rates
applied to the Group’s profits, is 24.2% (2022: 23.8%). The tax charge for the year is lower (2022:
higher) than the tax charge using the standard rate of corporation tax for the reasons set out in
the following reconciliation.
Profit before taxation from continuing operations
Corporation tax charge at standard rate of 24.2% (2022: 23.8%)
Permanent tax differences on loss/(profit) on disposal of businesses
Other non-deductible expenditure
Tax credits and incentives
Adjustments to prior year current and deferred tax charges
Taxation charge
2023
£m
185.6
44.9
2.8
4.5
(9.9)
(2.1)
40.2
2022
£m
151.5
36.1
(0.1)
9.1
(7.6)
(0.8)
36.7
153
Factors that may affect the future tax charge
The Group’s tax charge in future years is likely to be affected by the proportion of profits arising,
and the effective tax rates, in the various territories in which the Group operates, as well as
changes in tax law affecting future periods. Such law changes may affect the future availability
or amount of existing tax reliefs or incentives. Furthermore, future tax or other legal cases or
investigations may result in a re-assessment of the Group’s tax liabilities in respect of prior years.
Tax on items recognised directly in the Consolidated Statement of Comprehensive Income
Tax charge on net gain on effective portion of changes in fair value of forward
exchange contracts
Tax (credit)/charge on investment in equity instruments designated as at fair value
through other comprehensive income
Tax (credit)/charge on re-measurement of net defined benefit obligations, net of
foreign exchange
Aggregate current and deferred tax charge relating to items recognised directly
in the Consolidated Statement of Comprehensive Income
Tax on items recognised directly in the Consolidated Statement of Changes in Equity
Tax credit in relation to share-based payments
Aggregate current and deferred tax credit relating to items recognised directly
in the Consolidated Statement of Changes in Equity
2023
£m
1.1
(0.1)
(0.1)
0.9
2023
£m
(3.2)
2022
£m
–
0.6
3.4
4.0
2022
£m
(0.2)
(3.2)
(0.2)
The following tax (credits)/charges relate to items of income and expense that are excluded
from the Group’s adjusted performance measures.
Tax on items of income and expense that are excluded
from the Group’s adjusted profit before tax
The Group’s standard rate of corporation tax of 24.2% is marginally higher than the prior year
rate (23.8%), principally due to profits being made in countries with higher statutory tax rates.
‘Permanent tax differences on loss/(profit) on disposal of businesses’ in the current year
relates to the restriction of tax deductions for losses on the sale of shares in certain countries.
‘Other non-deductible expenditure’ in the prior year includes the £3.4m impact of non-deductible
foreign exchange losses.
‘Tax credits and incentives’ above, refers principally to research and development tax credits
and other reliefs for innovation, such as the UK Patent Box regime and Dutch Innovation Box
regime, as well as tax reliefs available for Foreign Derived Intangible Income in the US.
Tax credit on amortisation of acquisition-related intangible assets and impairment
of other property, plant and equipment
Tax credit on net transaction-related costs and fair value adjustments
Tax charge on retranslation of short-term inter-company loan balances
Tax credit on loss on disposal of businesses
Tax credit on configuration and customisation costs carried out by third parties on
material SaaS projects
Tax charge/(credit) on fair value through profit and loss movements on debt and
equity investments
Total tax credit
2023
£m
(4.7)
(1.7)
0.3
(0.2)
2022
£m
(4.6)
(0.5)
0.6
–
(10.8)
(5.1)
0.6
(16.5)
(1.4)
(11.0)
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 154
7. Taxation continued
The effective adjusted tax rate for the year was 21.5% (2022: 21.7%) as set out in the reconciliation
below.
Reconciliation of the statutory taxation charge to the adjusted taxation charge
Statutory taxation charge
Tax credit on items of income and expense that are excluded from the Group’s
adjusted profit before tax
Adjusted taxation charge
2023
£m
40.2
16.5
56.7
2022
£m
36.7
11.0
47.7
8. Dividends
Amounts recognised and paid as distributions to owners of the Company in the year
Interim dividend for the year ended 31 December 2023 of 25.3p (2022: 24.1p)
per share
Final dividend for the year ended 31 December 2022 of 51.3p (2022: 48.8p) per share
Amounts arising in respect of the year
The Group has applied the temporary exception included in IAS 12 ‘Income Taxes’ from
recognising or disclosing information about deferred tax related to ‘Pillar Two’ income taxes.
This mandatory temporary exception was included in the narrow scope amendments to IAS 12
published by the IASB in May 2023.
Interim dividend for the year ended 31 December 2023 of 25.3p (2022: 24.1p)
per share
Proposed final dividend for the year ended 31 December 2023 of 53.9p (2022: 51.3p)
per share
2023
£m
26.0
53.7
79.7
2023
£m
2022
£m
25.3
53.3
78.6
2022
£m
26.0
25.3
54.8
80.8
53.6
78.9
The proposed final 2023 dividend is subject to approval by shareholders at the AGM on 23 May
2024 and has not been included as a liability in these Consolidated Financial Statements.
The UK legislation to implement the OECD BEPS ‘Pillar Two’ or ‘GloBE’ minimum tax rules was
substantively enacted in June 2023. The rules will apply to Spectris from 1 January 2024. We
anticipate that these legislative changes could give rise to limited upward pressure on the
Group’s adjusted effective tax rate from 2024. We currently estimate that the GloBE rules could
increase the Group’s adjusted effective tax rate by in the region of 1 percentage point for 2024.
The impact is expected to arise due to the Group receiving tax incentives for innovation under
local laws in certain countries which, in limited circumstances, can reduce effective tax rates
below 15%. The Group is continuing to assess the impact of Pillar Two income tax legislation.
Management judgement is applied to determine the level of provisions required in respect
of both direct and indirect taxes. The Group is potentially subject to tax audits in many
jurisdictions. By their nature these are often complex and could take a significant period of
time to be agreed with the tax authorities. Judgement is therefore applied based on the
interpretation of country-specific tax legislation and the likelihood of settlement. The Group
estimates and accrues taxes that will ultimately be payable when reviews or audits by tax
authorities of tax returns are completed. These estimates include judgements about the
position expected to be taken by each tax authority.
The Group applies judgement in respect of possible tax audit adjustments primarily in
respect of transfer pricing as well as in respect of financing arrangements and tax credits and
incentives. In respect of transfer pricing, the level of provision is determined by reference to
management judgements of the adjustments that would arise in the event that certain
intra-group transactions are successfully challenged as not being at arm’s length.
Management estimates of the level of risk arising from tax audit may change in the next year
as a result of changes in legislation or tax authority practice or correspondence with tax
authorities during a specific tax audit. It is not possible to quantify the impact that such future
developments may have on the Group’s tax positions. Actual outcomes and settlements may
differ from the estimates recorded in these Consolidated Financial Statements.
Judgement is also applied relating to the recognition of deferred tax assets which are
dependent on an assessment of the generation of future taxable income in the countries
concerned in which temporary differences become deductible or in which tax losses can be
utilised. These estimates may change in the next year if there are changes in the forecast
profitability of the relevant company.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 155
9. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable
to ordinary shareholders by the weighted average number of ordinary shares outstanding
during the year (excluding treasury shares).
Diluted earnings per share amounts are calculated by dividing the net profit attributable to
ordinary shareholders by the weighted average number of ordinary shares outstanding during
the year but adjusted for the effects of dilutive options. The key features of the Company’s share
option schemes are described in note 22.
Basic earnings per share from continuing operations
Profit after tax from continuing operations (£m)
Weighted average number of shares outstanding (millions)
Basic earnings per share from continuing operations (pence)
Diluted earnings per share from continuing operations
Profit after tax from continuing operations (£m)
Basic weighted average number of shares outstanding (millions)
Weighted average number of dilutive 5p ordinary shares under option (millions)
Weighted average number of 5p ordinary shares that would have been issued at
average market value from proceeds of dilutive share options (millions)
Diluted weighted average number of shares outstanding (millions)
Diluted earnings per share from continuing operations (pence)
Basic earnings per share from discontinued operations
Profit after tax from discontinued operations (£m)
Weighted average number of shares outstanding (millions)
Basic earnings per share from discontinued operations (pence)
Diluted earnings per share from discontinued operations
Profit after tax from discontinued operations (£m)
Diluted weighted average number of shares outstanding (millions)
Diluted earnings per share from discontinued operations (pence)
2023
145.4
103.6
140.3
2023
145.4
103.6
0.9
(0.2)
104.3
139.4
2023
–
103.6
–
2023
–
104.3
–
2022
114.8
107.6
106.7
2022
114.8
107.6
0.9
(0.2)
108.3
106.0
2022
286.7
107.6
266.4
2022
286.7
108.3
264.7
The denominators used for diluted earnings per share from discontinued operations are the
same as those used for diluted earnings per share from continuing operations.
10. Goodwill and other intangible assets
Cost
At 1 January 2022
Measurement period
adjustments
Additions – separately
acquired
Additions – internal
development
Additions – business
combinations
Reclassifications
Disposals
Disposals of business
Foreign exchange
difference
At 31 December 2022
Additions – separately
acquired
Additions – internal
development
Additions – business
combinations
Reclassifications
Transfers to assets held
for sale
Disposals
Disposals of business
Foreign exchange
difference
At 31 December 2023
Note
Goodwill
£m
Patents,
contractual
rights and
technology
£m
Customer-
related and
trade
names
£m
Software
£m
Total
£m
788.9
162.0
226.8
54.3
1,232.0
(0.8)
–
–
49.7
–
–
(213.4)
57.9
682.3
–
–
24.6
–
(46.0)
–
(38.6)
(16.2)
606.1
–
–
3.4
22.9
–
–
(36.9)
16.9
168.3
–
3.2
6.9
–
(11.0)
–
(11.8)
(4.6)
151.0
–
–
–
36.5
–
–
(81.4)
20.1
202.0
–
–
14.8
–
(3.1)
(0.4)
(40.6)
(8.0)
164.7
–
1.0
–
–
0.3
(1.3)
(8.0)
2.6
48.9
0.8
–
–
1.9
(2.8)
(7.3)
(0.1)
(0.9)
40.5
(0.8)
1.0
3.4
109.1
0.3
(1.3)
(339.7)
97.5
1,101.5
0.8
3.2
46.3
1.9
(62.9)
(7.7)
(91.1)
(29.7)
962.3
23
24
23
24
24
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 156
10. Goodwill and other intangible assets continued
The most significant amounts of goodwill are as follows:
Accumulated amortisation and
impairment
Note
Goodwill
£m
Patents,
contractual
rights and
technology
£m
Customer-
related and
trade
names
£m
Software
£m
At 1 January 2022
Charge for the year
Disposals
Disposals of business
Foreign exchange difference
At 31 December 2022
Charge for the year
Reclassifications
Transfers to assets held for sale
Disposals
Disposals of business
Foreign exchange difference
At 31 December 2023
Carrying amount
At 31 December 2023
At 31 December 2022
157.5
–
–
(92.1)
10.8
76.2
–
–
–
–
(35.1)
(0.5)
40.6
102.5
15.4
–
(36.9)
10.2
91.2
15.1
–
(4.5)
–
(9.7)
(3.4)
88.7
125.3
7.7
–
(42.9)
9.9
100.0
7.2
–
(0.7)
(0.4)
(38.7)
(2.8)
64.6
46.2
3.2
(1.3)
(6.6)
2.4
43.9
2.6
0.1
(2.8)
(7.3)
–
(0.7)
35.8
24
24
24
Total
£m
431.5
26.3
(1.3)
(178.5)
33.3
311.3
24.9
0.1
(8.0)
(7.7)
(83.5)
(7.4)
229.7
565.5
606.1
62.3
77.1
100.1
102.0
4.7
5.0
732.6
790.2
Goodwill is allocated to the cash-generating units that are anticipated to benefit from the
acquisition.
The Group’s identified cash-generating units total five, smaller than the three reportable
segments, being the two operating companies in the Spectris Scientific Division (Malvern
Panalytical and Particle Measuring Systems), the Spectris Dynamics Division, and the two
operating companies in the Other non-reportable segment (Red Lion Controls and Servomex)
as at 31 December 2023 (2022: five). Goodwill arising on a bolt-on acquisition is combined with
the goodwill in the existing Group company and is not considered separately for impairment
purposes, since such acquisitions are quickly integrated.
Malvern Panalytical
Spectris Dynamics
Non-significant CGUs
2023
£m
235.8
294.9
34.8
565.5
2022
£m
234.6
290.4
81.1
606.1
Goodwill at 31 December 2023 excludes balances transferred to assets held for sale totalling
£46.0m (2022: £nil).
Included within ‘Non-significant CGUs’ are two – Particle Measuring Systems and Servomex
(2022: three – Particle Measuring Systems, Red Lion Controls and Servomex) cash-generating
units, in which none of the goodwill balances are considered to be individually significant.
The Group defines significant as 10% of the total carrying value of goodwill.
Goodwill is not amortised but is tested for impairment annually or whenever there is an
indication that the asset may be impaired. As part of the annual impairment review, the
carrying amount of goodwill has been assessed with reference to its recoverable amount
determined based on value in use. In assessing value in use, the forecast projected cash flows
of each cash-generating unit, which are based on actual operating results, the most recent
budget for the next financial year as approved by the Board, detailed strategic review
projections and an assumed long-term growth rate to perpetuity, are discounted to their
present value using a pre-tax discount rate that reflects the time value of money and the risks
specific to the cash-generating unit.
Key assumptions used in the value in use calculations
The calculation of value in use is most sensitive to the following assumptions:
• CGU specific operating assumptions on business performance over the forecast period to
December 2028 (five years);
• discount rates; and
• projected growth rates used to extrapolate risk adjusted cash flows beyond the forecast
period.
CGU specific operating assumptions are applicable to the forecasted cash flows for the
forecast period to December 2028 and relate to revenue forecasts, expected project
outcomes and forecast operating margins in each of the operating companies. Impact of
macroeconomic trends such as rising inflation rates has been applied to CGUs. The relative
value ascribed to each assumption will vary between CGUs as the forecasts are built up from
the underlying operating companies within each CGU group. A long-term rate is applied to
these values for the year to December 2028 and onwards.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 157
10. Goodwill and other intangible assets continued
The Group has considered the potential impact of climate change on future cash flows in the
impairment test. This took into consideration the quantification of the risks and opportunities
identified in the TCFD disclosures outlined in the Sustainability section of the Strategic Report
on pages 52 to 77, as well as the commitments made in our journey towards achieving our Net
Zero ambition. This included assessing the impact and likelihood of climate change as set out
in the Principal Risks and uncertainties on pages 48 to 50. In terms of physical risk, this could
result in a reduction of our ability to conduct business operations from certain locations on a
temporary or permanent basis or risk of harm to employees or physical assets. In terms of
transition risk this could lead to increased costs through market regulation or additional taxes.
After taking into account the potential impact of climate change, significant headroom
remained in the model.
The Group calculates value in use using the strategic plans relevant to each CGU. A long-term
growth rate of 2.0% (2022: 2.0%) has been applied consistently across each CGU. Discount rates
are based on estimations of the assumptions that market participants operating in similar
sectors to Spectris would make, using the Group’s economic profile as a starting point and
adjusting appropriately. The Directors do not currently expect any significant change in the
present base discount rate of 14.1% (2022: 12.9%). The base discount rate, which is pre-tax and is
based on short-term variables, may differ from the Weighted Average Cost of Capital (WACC).
Discount rates are adjusted for economic risks that are not already captured in the specific
operating assumptions for each CGU group. This results in the impairment testing using
discount rates ranging from 14.6% to 15.9% (2022: 13.5% to 15.0%) across the CGU groups. The
following table discloses the discount rates and short-term growth rates for each significant
CGU, and the average across the non-significant CGUs. Red Lion Controls has been included in
our assessment.
Malvern Panalytical
Spectris Dynamics
Non-significant CGUs
Risk Adjusted
discount rates
Short-term
growth rates
2023
%
14.6
14.7
15.9
2022
%
13.5
14.1
15.0
2023
%
9.8
9.4
10.1
2022
%
7.6
8.3
13.0
Impairment of goodwill and acquisition-related intangible assets
2023 and 2022
There were no impairments of goodwill and intangible assets recognised in 2023 and 2022.
Sensitivity analysis
For all cash-generating units with goodwill balances at 31 December 2023 the Directors do not
consider that there are any reasonably possible sensitivities for the business that could arise in
the next 12 months that could result in an impairment charge being recognised.
Other intangible assets
Internally generated assets arising from the capitalisation of qualifying development
expenditure typically have a finite expected useful life of four to ten years. Capitalised
development expenditure is amortised on a straight-line basis. All amortisation charges for
the year have been charged against operating profit. The Group has capitalised £3.2m of
internally-generated intangible assets from development expenditure in 2023 (2022: £3.4m).
Accumulated amortisation on internally-generated intangible assets was £8.6m (2022: £5.5m).
The customer-related assets recognised on the acquisition of Concurrent Real Time
(Concurrent-RT) in 2021, Dytran Instruments Inc (Dytran) in 2022, and MicroStrain Sensing
Systems Business (MicroStrain) in 2023, and included within the Spectris Dynamics reportable
segment, are considered significant by the Directors as they represent 50% (2022: 57%), 28%
(2022: 31%) and 12% (2022: nil) of the NBV of total customer-related and trade names
respectively. The carrying amount of the Concurrent-RT customer-related intangible assets at
31 December 2023 is £48.4m (2022: £54.0m) and is being amortised over 20 years with the
remaining amortisation period being 16.5 years. The carrying amount of the Dytran customer-
related intangible assets at 31 December 2023 is £23.4m (2022: 26.0m) and is being amortised
over 20 years with the remaining amortisation period being 18.75 years. The carrying amount of
the MicroStrain customer-related intangible assets at 31 December 2023 is £7.3m (2022: nil) and
is being amortised over 14.7 years with the remaining amortisation period being 14.45 years.
The technology assets recognised on the acquisition of Concurrent-RT in 2021 and Creoptix AG
in 2022, and included within the Spectris Dynamics and Spectris Scientific reportable
segments respectively, are considered significant by the Directors. Concurrent-RT represents
22% (2022: 24%) of total NBV of patents, contractual rights and technology. The carrying
amount of the Concurrent-RT technology intangible assets at 31 December 2023 is £15.3m
(2022: £18.5m) and is being amortised over ten years with the remaining amortisation period
being six and a half years. Creoptix AG represents 25% (2022: 24%) of total NBV of patents,
contractual rights and technology. The carrying amount of the Creoptix AG technology
intangible assets at 31 December 2023 is £16.9m (2022: £18.3m) and is being amortised over
ten years with the remaining amortisation period being eight years.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 158
11. Property, plant and equipment
Property, plant and equipment: owned
Cost
At 1 January 2022
Additions – separately acquired
Additions – business combinations
Reclassifications
Transfer to assets held for sale
Disposals
Disposal of business
Foreign exchange difference
At 31 December 2022
Additions – separately acquired
Additions – business combinations
Reclassifications
Transfers to assets held for sale
Disposals
Disposal of business
Foreign exchange difference
At 31 December 2023
Accumulated depreciation and impairment
At 1 January 2022
Charge for the year
Reclassifications
Transfers to assets held for sale
Disposals
Disposal of business
Foreign exchange difference
At 31 December 2022
Charge for the year
Reclassifications
Transfers to assets held for sale
Disposals
Disposal of business
Foreign exchange difference
At 31 December 2023
Carrying amount
At 31 December 2023
At 31 December 2022
Freehold
property
£m
Leasehold
property
£m
Plant and
equipment
£m
Note
23
24
24
23
24
24
24
24
24
24
131.1
19.0
1.0
–
(3.3)
(0.6)
(17.3)
9.2
139.1
2.7
–
(4.5)
(6.3)
(3.9)
(4.1)
(3.7)
119.3
50.4
3.5
–
(1.6)
–
(3.4)
3.2
52.1
3.4
(1.0)
(0.3)
(3.5)
(1.7)
(1.4)
47.6
71.7
87.0
25.0
2.5
0.6
–
–
(0.7)
(1.8)
1.6
27.2
1.9
–
4.7
(1.4)
(1.0)
(0.3)
(1.0)
30.1
13.1
2.5
0.1
–
(0.7)
(1.2)
0.8
14.6
2.3
1.0
(1.3)
(0.9)
(0.1)
(0.8)
14.8
15.3
12.6
197.6
18.9
1.4
(0.3)
–
(6.8)
(14.4)
11.2
207.6
16.0
0.7
(2.1)
(9.2)
(21.9)
(13.5)
(5.5)
172.1
139.7
14.6
–
–
(6.0)
(10.2)
8.4
146.5
13.7
(0.1)
(7.0)
(21.4)
(4.7)
(4.1)
122.9
The amount included in the cost of plant and equipment of assets in the course of construction
was £15.4m (2022: £15.4m).
No borrowing costs were capitalised during either year.
49.2
61.1
136.2
160.7
Of the total depreciation charge of £19.4m (2022: £20.6m), the amount attributable to the
depreciation on fair value adjustments to acquisition-related property, plant and equipment
was £nil (2022: £0.2m).
There were no additions relating to the receipt of government grants in 2023 (2022: £nil).
Of the total additions of £20.6m the amount attributable to climate-related capital expenditure
is £1.6m that has been counted towards achieving our Net Zero ambition. These costs include
all the activities disclosed in the Sustainability section of the Strategic Report.
Property, plant and equipment: right-of-use
At 1 January 2022
Additions
Depreciation and impairment
Disposals
Disposal of business
Additions – business combinations
Re-measurement
Foreign exchange difference
At 31 December 2022
Additions
Depreciation and impairment
Disposals
Disposal of business
Transfers to assets held for sale
Additions – business combinations
Re-measurement
Foreign exchange difference
At 31 December 2023
Property, plant and equipment: owned
Property, plant and equipment: right-of-use
Note
Property
£m
Plant and
equipment
£m
24
23
24
24
23
54.7
9.2
(10.2)
(2.2)
(1.8)
1.0
–
3.1
53.8
10.6
(9.5)
(0.1)
(3.2)
(0.8)
1.1
–
(1.1)
50.8
5.8
3.9
(4.0)
(0.3)
–
–
0.2
0.3
5.9
5.4
(3.9)
(0.4)
–
–
–
0.4
(0.1)
7.3
Total
£m
60.5
13.1
(14.2)
(2.5)
(1.8)
1.0
0.2
3.4
59.7
16.0
(13.4)
(0.5)
(3.2)
(0.8)
1.1
0.4
(1.2)
58.1
2023
£m
136.2
58.1
194.3
2022
£m
160.7
59.7
220.4
Total
£m
353.7
40.4
3.0
(0.3)
(3.3)
(8.1)
(33.5)
22.0
373.9
20.6
0.7
(1.9)
(16.9)
(26.8)
(17.9)
(10.2)
321.5
203.2
20.6
0.1
(1.6)
(6.7)
(14.8)
12.4
213.2
19.4
(0.1)
(8.6)
(25.8)
(6.5)
(6.3)
185.3
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
159
12. Investments in equity instruments, investment in associates and joint operation
Investments in equity instruments
Investments in equity instruments designated as at fair value through other
comprehensive income
Total investment in equity instruments at 31 December
2023
£m
24.3
24.3
2022
£m
29.3
29.3
At 31 December 2023, the Group’s investments in equity instruments designated to be
measured at fair value through other comprehensive income consists of a) 27,752,567 A1
investment units in the EZ Ring FPCI (the fund holding the combined UTAC-Millbrook group),
which has a fair value of £23.9m (2022: £28.6m) b) 10,000,000 shares in Envirosuite Ltd, which
has a fair value of £0.4m (2022: £0.7m).
These investments were not held for trading at initial recognition and were not contingent
consideration. Instead, they are held for medium- to long-term strategic purposes. Accordingly,
the Group elected to designate these investments in equity instruments as at fair value
through other comprehensive income at initial recognition as it believes that recognising
short-term fluctuations in these investments’ fair value in profit and loss would not be
consistent with the Group’s strategy of holding the investment for long-term purposes and
realising its performance potential in the long run.
The Group does not consider that it is able to exercise significant influence over any of the
above investments as its percentage ownership and voting rights of the businesses is small
and it does not have any unusual powers or rights over the businesses.
No dividends have been recognised on investments in equity instruments during the year
(2022: £nil).
Investment in associates
The Group’s investments in associates at 31 December 2023 were as follows:
Name of associates
Principal activity
Country of incorporation
or registration
Percentage
shareholding
CM Labs Simulations Inc. Manufacturer of turnkey solutions
Bioanalytic instrumentation
LumaCyte Incorporated
Canada
United States
19.4%
12.2%
Summarised financial information in respect of the Group’s immaterial associates are set out
below. The summarised information has been presented in accordance with IFRS (after
adjustments by the Group for equity accounting purposes and to comply with the Group’s
accounting policies).
At 1 January
Arising on acquisition of associates
Share of loss of associates
Foreign exchange difference
At 31 December
2023
£m
2.9
7.8
(0.1)
0.2
10.8
2022
£m
–
2.9
–
–
2.9
There was no other comprehensive income or dividends received from associates in the year
(2022: £nil).
2023
On 21 August 2023, the Group acquired 12.2% (10.9% fully diluted) of the shares of LumaCyte
Incorporated (LumaCyte) for total consideration of USD10.0m (£7.8m), settled in cash. LumaCyte
is an advanced bioanalytic instrumentation company based in Virginia, United States, and will
provide Spectris with further exposure and deeper insights into the high growth and disruptive
area of Cell and Gene Therapy and vaccine markets. As a result of the rights and powers attached
to the Group’s shareholding, the Group has concluded that it has significant influence and, as a
result, will equity account for its share of LumaCyte’s results, as an investment in associate. This
investment in associate is considered immaterial to the Group on an individual basis.
2022
On 8 April 2022, the Group acquired 19.4% (17.2% fully diluted) of the shares of CM Labs
Simulations Inc. (CM Labs) for total consideration of CAD4.3m (£2.6m), settled in cash. CM Labs
is a manufacturer of turnkey solutions for operator training simulators in the heavy equipment
industries. These simulators are developed using CM Labs’ proprietary Vortex software, which is
also commercially available as a machinery virtual prototyping software platform for tasks
ranging from product development to creation of custom simulators. Its principal place of
business is Montreal, Quebec, Canada. As a result of the rights and powers attached to the
Group’s shareholding, the Group has concluded that it has significant influence and, as a result,
will equity account for its share of CM Labs’ results, as an investment in associate. This
investment in associate is considered immaterial to the Group on an individual basis.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 160
12. Investments in equity instruments, investment in associates and joint operation
continued
Joint operation
The Group’s immaterial joint operation has share capital consisting solely of ordinary shares and is
indirectly held, and principally operates in Slovenia. The financial and operating activities of the
operation are jointly controlled by the participating shareholders and are primarily designed for
all but an insignificant amount of the output to be consumed by the shareholders.
Name of joint operation
Principal activity
Country of incorporation
or registration
Percentage
shareholding
Blueberry d.o.o.
Research and development activities
Slovenia
50%
Significant judgement made by Group in determining the nature of its interest and the
type of joint arrangement
Blueberry d.o.o. is a joint arrangement that is primarily designed for the provision of output to
the parties sharing joint control; this indicates that the parties have rights to substantially all the
economic benefits of the assets. The liabilities of the arrangements are in essence satisfied by
cash flows received from both parties; this dependence indicates that the parties in effect have
obligations for the liabilities. It is these facts and circumstances that give rise to the
classification of this entity as a joint operation.
13. Inventories
Raw materials
Work in progress
Finished goods and goods held for resale
14. Trade and other receivables
Current
Trade receivables
Prepayments
VAT and similar taxes receivable
Research and development credits recoverable
Deferred and contingent consideration on acquisitions
Other receivables
Contract assets
Non-current
Prepayments
Other receivables
2023
£m
239.5
27.6
32.2
1.6
0.5
8.6
7.9
317.9
2023
£m
3.7
2.2
5.9
2022
£m
283.3
28.8
27.2
2.9
–
10.1
10.2
362.5
2022
£m
2.3
1.9
4.2
Other current and non-current receivables include advances to suppliers of £4.1m (2022:
£2.4m) and other debtors of £6.7m (2022: £9.6m).
2023
£m
110.3
43.5
78.0
231.8
2022
£m
129.1
49.0
85.2
263.3
Trade receivables are non-interest bearing. Standard credit terms provided to customers differ
according to business and country, and are typically between 30 and 60 days. Trade receivables
are stated after the provision for impairment of £7.5m (2022: £5.3m).
The fair value of trade and other receivables approximates to its carrying amount due to the
short-term maturities associated with these items. There is no impairment risk identified with
regards to other receivables where no amounts are past due.
In the ordinary course of business, the Group makes provision for slow-moving, excess and
obsolete inventory to write it down to its net realisable value based on an assessment of
technological and market developments specific to the relevant business, and an analysis of
historical and projected usage on an individual item or product line basis.
Expenses relating to inventories written down during the year totalled £12.9m (2022: £10.5m)
for the Group.
Finished goods and goods held for resale expected to be utilised after 12 months amounted to
£0.3m (2022: £0.2m).
The maximum exposure to credit risk for trade receivables at 31 December by geographic
region was:
UK
Germany
France
Rest of Europe
USA
Rest of North America
Japan
China
South Korea
Rest of Asia
Rest of the world
2023
£m
9.1
19.0
15.7
43.9
55.3
8.3
14.8
20.2
8.6
30.5
14.1
239.5
2022
£m
9.8
23.8
16.7
46.1
77.1
9.8
15.0
25.0
9.5
37.1
13.4
283.3
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 14. Trade and other receivables continued
Expected credit losses
The Group measures the loss allowance for trade receivables at an amount equal to lifetime
expected credit losses (ECL). The ECL on trade receivables are estimated using a provision
matrix by reference to past default experience of the debtor and an analysis of the debtor’s
current financial position, adjusted for factors that are specific to the debtor, general economic
conditions of the industry in which the debtor operates and an assessment of both the current
as well as the forecast direction of conditions at the reporting date.
There has been no change in the estimation techniques or significant assumptions made
during the current reporting period.
The Group writes off a trade receivable when there is information indicating that the debtor is
in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor
has been placed under liquidation or has entered into bankruptcy proceedings.
The ageing of trade receivables and related provisions for impairment at 31 December was:
161
15. Cash and cash equivalents
Cash and cash equivalents included in current assets
Cash and cash equivalents included in assets held for sale
Cash and cash equivalents
Note
24
2023
£m
138.5
0.3
138.8
2022
£m
228.1
–
228.1
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and
liabilities is disclosed in note 27.
Included in Cash and Cash Equivalents is restricted cash of £4.1m (2022: £2.4m) held in India.
There are controls in place over the cross-border transfer of Indian Rupees, meaning that the
Group cannot readily access these funds.
16. Borrowings
Not past due
One month past due
Two months past due
Three months past due
Four months past due
More than four months past due
2023
2022
Gross
£m
Impairment
£m
Gross
£m
Impairment
£m
161.4
33.6
15.6
7.3
5.7
23.4
247.0
–
–
–
–
–
7.5
7.5
199.0
36.3
14.7
10.5
5.6
22.5
288.6
–
–
–
–
–
5.3
5.3
Current
Interest rate
Repayable date
Bank overdrafts
Bank loans unsecured – £45.0m
(2022: £45.0m) uncommitted facility
Total current borrowings
Determined on
draw down
On demand
On demand
Non-current
Bank loans unsecured – $500.0m
revolving credit facilities
Total non-current borrowings
Interest rate
Maturity date
Relevant RFR/
IBOR +55bps
31 July 2025
The movement in the provision for impairment in respect of trade receivables during the year
was as follows:
Total current and non-current borrowings
Total unsecured borrowings
2023
£m
–
–
–
2023
£m
–
–
–
–
2022
£m
0.1
–
0.1
2022
£m
–
–
0.1
0.1
At 1 January
Provision for impairment of receivables
Impairment loss utilised
Disposal of business
Foreign exchange difference
At 31 December
2023
£m
5.3
2.9
(0.5)
(0.1)
(0.1)
7.5
2022
£m
6.1
0.2
(1.1)
(0.4)
0.5
5.3
All of the above impairment losses relate to receivables arising from contracts with customers.
Significant changes in contract assets during the year
2023
There were no significant movements in contract assets in 2023.
2022
There were no significant movements in contract assets in 2022.
At 31 December 2023, the $500m (£393.1m) revolving credit facilities were undrawn
(31 December 2022: the $500m (£414.9m) facilities were undrawn).
Movements in total unsecured borrowings are reconciled as follows:
At 1 January
Proceeds from borrowings
Repayment of borrowings
Effect of foreign exchange rates
At 31 December
2023
£m
0.1
–
(0.1)
–
–
2022
£m
–
326.2
(326.8)
0.7
0.1
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 162
16. Borrowings continued
Changes in liabilities arising from financing arrangements
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for
which cash flows were, or future cash flows will be, classified in the Group’s Consolidated Statement of Cash Flows as cash flow from financing activities.
£m
Bank overdrafts (including notional cash-pool related bank overdrafts)
Total borrowings
Lease liabilities (including lease liabilities classified as liabilities held for sale)2
Total liabilities from financing arrangements
£m
Bank overdrafts (including notional cash-pool related bank overdrafts)
Debt
Total borrowings
Lease liabilities
Total liabilities from financing arrangements
Note
15
Note
15
At 31 December
2022
Financing cash
flows1
New leases
Acquisitions of
businesses
Disposal of
businesses
Other non-cash
movement
Exchange
movement
At 31 December
2023
0.1
0.1
65.1
65.2
(0.1)
(0.1)
(15.6)
(15.7)
–
–
16.1
16.1
–
–
1.0
1.0
–
–
(3.6)
(3.6)
–
–
2.1
2.1
–
–
(1.6)
(1.6)
–
–
63.5
63.5
At 31 December
2021
Financing cash
flows1
New leases
Acquisitions of
businesses
Disposal of
businesses
Other non-cash
movement
Exchange
movement
At 31 December
2022
–
–
–
65.9
65.9
0.1
(0.7)
(0.6)
(16.4)
(17.0)
–
–
–
13.2
13.2
–
0.1
0.1
1.0
1.1
–
–
–
(3.2)
(3.2)
–
(0.1)
(0.1)
0.3
0.2
–
0.7
0.7
4.3
5.0
0.1
–
0.1
65.1
65.2
1. The cash flows from bank overdrafts (including notional cash-pool related bank overdrafts) and debt make up the net amount of proceeds from borrowings, repayment of borrowings and notional cash-pooling movement in the
Consolidated Statement of Cash Flows.
2. Lease liabilities at 31 December 2023 includes £0.8m of liabilities classified as held for sale (2022: £nil, 2021: £nil).
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 163
17. Trade and other payables
Current
Trade payables
Accruals
Customer advances
Contract liabilities
Deferred and contingent consideration on acquisitions
VAT and similar taxes payable
Goods received not invoiced
Share buyback accrual
Other payables
Non-current
Contract liabilities
Accruals
2023
£m
42.8
114.9
31.8
85.5
10.6
27.6
7.9
45.9
2.4
369.4
2023
£m
4.0
11.1
15.1
2022
£m
62.8
114.0
48.5
98.4
3.3
27.0
14.9
–
4.8
373.7
2022
£m
3.9
9.9
13.8
See note 21 in the Consolidated Financial Statements for further details on the Group’s share
buyback accrual.
The fair value of trade and other payables approximates to their carrying amount due to the
short-term maturities associated with these items.
Total contract liabilities relate to the following product groups:
Spectris Scientific
Spectris Dynamics
Others
2023
£m
58.0
31.4
0.1
89.5
2022
£m
71.5
30.6
0.2
102.3
Revenue recognised in 2023 that was included in the contract liabilities balance at the
beginning of the year amounts to £48.1m (2022: £57.2m).
Significant changes in contract liabilities during the year
2023
The decrease in contract liabilities reflects decrease in systems-related orders in Spectris
Scientific.
2022
During 2022, £1.4m of contract liabilities balances were recognised as part of the acquisition of
Creoptix, in the Spectris Scientific product group. The remainder of the increase primarily
reflects increased systems-related orders in Spectris Scientific.
There were no other significant changes in contract liabilities balances during 2022.
18. Provisions
At 1 January 2023
Balance transferred to Defined Benefit
Obligation Plans
Provision during the year
Disposal of business
Utilised during the year
Released during the year
Transfer to liabilities held for sale
Foreign exchange difference
At 31 December 2023
Note
Reorganisation
£m
Product
warranty
£m
Legal,
contractual
and other
£m
24
3.1
–
0.5
–
(2.8)
(0.1)
–
(0.1)
0.6
7.0
–
5.2
–
(4.4)
(0.2)
(0.7)
(0.2)
6.7
7.1
(1.4)
1.5
(0.4)
(2.2)
(0.4)
(0.2)
(0.2)
3.8
Total
£m
17.2
(1.4)
7.2
(0.4)
(9.4)
(0.7)
(0.9)
(0.5)
11.1
Reorganisation
Reorganisation provisions relate to committed restructuring plans in place within the business.
Costs are mostly expected to be incurred within one year and there is little judgement in
determining the amount.
Product warranty
Product warranty provisions reflect commitments made to customers on the sale of goods
in the ordinary course of business and included within the Group’s standard terms and
conditions. Warranty commitments typically apply for a 12-month period, but can extend to
36 months. These extended warranties are not individually significant.
Legal, contractual and other
Legal, contractual and other provisions mainly comprise amounts provided against open legal
and contractual disputes arising in the normal course of business. The Group has on occasion
been required to take legal or other actions to protect its intellectual property rights, to enforce
commercial contracts or otherwise and similarly to defend itself against proceedings brought
by other parties. Provisions are made for the expected costs associated with such matters,
based on past experience of similar items and other known factors, taking into account
professional advice received, and represent management’s best estimate of the most likely
outcome. The timing of utilisation of these provisions is frequently uncertain, reflecting the
complexity of issues and the outcome of various court proceedings and negotiations.
Contractual and other provisions represent the Directors’ best estimate of the cost of settling
current obligations.
No provision is made for proceedings which have been or might be brought by other parties
against Group companies unless management, taking into account professional advice
received, assesses that it is probable that such proceedings may be successful. Contingent
liabilities associated with such proceedings have been identified, but the Directors are of the
opinion that any associated claims that might be brought can be defeated successfully and,
therefore, the possibility of any material outflow in settlement is assessed as remote.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 164
19. Retirement benefit plans
Spectris plc operates funded defined benefit and defined contribution pension plans for the
Group’s qualifying employees in the UK. At 31 December 2023, 17 overseas subsidiaries (2022:
16) in six overseas countries (2022: six) provided defined benefit plans. Other UK and overseas
subsidiaries have their own defined contribution plans invested in independent funds.
Defined benefit plans
The UK, German, Dutch, Swiss, French, Italian and Japanese plans provide pension benefits in
and at retirement, death in service and, in some cases, disability benefits to members. The
pension benefits are linked to members’ final salary at retirement and their service life. Since
31 December 2009, the UK plan has been closed to all service accruals. The German and
Dutch plans are closed to new members. The Italian plan is a mandatory Trattamento di Fine
Rapporto (TFR) severance plan, whilst the Japanese and French plans provide lump sum
benefits to members on retirement.
The UK plan is administered by a pension fund, but the Swiss and Dutch plans are held by
insurance companies that are legally separate from the Group. The majority of the overseas
plan assets are insurance policies. The UK plan is managed by a Board of Trustees that
represents both employees and employer, who is required to act in the best interest of the
plan’s participants and is responsible for setting certain policies (e.g. investment, contribution
and indexation policies) of the various funds.
The plans expose the Group to actuarial risks, such as longevity risk, currency risk, interest
rate risk and market (investment) risk. Inflation and interest rate hedges are taken out to
mitigate against risks arising on the UK plan and some reinsurance exists in respect of the
overseas plans.
The overseas plans are funded by the Group’s overseas subsidiaries, and the UK plan has been
funded by both the Group’s UK subsidiaries and the Company. The assets of the UK plan are
invested in accordance with Section 40 of the Pensions Act 1995. Although the Act permits 5%
of the plan’s assets to be invested in ‘employer-related investments’, the Trustee has elected
that none of the plan assets are to be invested directly in Spectris plc shares. The Trustee also
holds interest rate and inflation swaps to help protect against the impact of changes in
prevailing interest rates and price inflation, which in conjunction with the corporate bond
portfolio aims to fully hedge against interest and inflation rate risks on the basis used by the
Trustee to fund the plan. Trustee investment in derivatives is only made in so far as they
contribute to the reduction of investment risks or facilitate efficient portfolio management
and are managed such as to avoid excessive risk exposure to a single counterparty or other
derivative operations.
The Trustee of the UK plan has invested a large proportion of the plan’s assets in a buy and
maintain corporate bond portfolio, designed to move in a similar way to the value of the plan’s
liabilities. The Trustee has also entered into a swaps strategy which seeks to further mitigate
against movement in interest rates and price inflation over time.
The funding requirements are based on the individual fund’s actuarial measurement
framework set out in the funding policies of the various plans.
The Group has determined that, in accordance with the terms and conditions of the defined
benefit plans, and in accordance with statutory requirements (including minimum funding
requirements) of the plans of the respective jurisdictions, the present value of the refunds or
reductions in future contributions is not lower than the balance of the total fair value of the plan
assets less the total present value of obligations. This determination has been made on a
plan-by-plan basis. As such, no decrease in the defined benefit asset was necessary
at 31 December 2023.
The last full actuarial valuation for the UK plan was 31 December 2020 and for the overseas
plans was 31 December 2022, where available. Where applicable, the valuations were updated
to 31 December 2023 for IAS 19 (Revised) ‘Employee Benefits’ purposes by qualified
independent actuaries.
The Group’s contributions to defined benefit plans during the year ended 31 December 2023
were £2.5m (2022: £2.0m). Contributions for 2024 are expected to be £1.2m for the UK plan and
£1.3m for the overseas plans.
As a result of the UK plan’s full actuarial valuation at 31 December 2020, it has been agreed that
the Group will make past service deficit recovery payments totalling £1.2m a year for a period of
six years from 1 January 2022 until 31 December 2027. The contribution rates are subject to
review at future valuations and periodic certifications of the schedule of contributions.
The assumptions used by the actuary to value the liabilities of the defined benefit plans were:
Discount rate
Salary increases
Pension increases in payment
Pension increases in deferment
Inflation assumption
Interest credit rate
2023
Overseas
plans
% p.a.
UK plan
% p.a.
4.54
n/a
1.35–3.30
1.50–3.00
1.95 –3.62 0.00–2.25
n/a
2.52–2.95
1.25–3.5
2.52–2.95
1.00
n/a
2022
Overseas
plans
% p.a.
UK plan
% p.a.
4.85
n/a
2.15–3.80
1.50–3.00
2.30–3.41 0.00–2.25
n/a
2.55–3.02
1.25–3.50
2.55–3.02
1.00
n/a
The weighted average duration of the defined benefit obligation at 31 December 2023 was
approximately 11 years (2022: 12 years) for the UK plan and 15.2 years (2022: 14.3 years) for the
overseas plans.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 165
19. Retirement benefit plans continued
Pensioner life expectancy assumed in the 31 December 2023 valuation is based on the
following tables:
UK plan
103% and 106% of the S3PA tables centred in 2013 for males and females respectively.
Future improvements in line with the core CMI_2022 model subject to a long-term
improvement rate of 1.25% per annum, an initial addition of 0.2% and a 25% weighting on
2022 mortality experience.
French plans
German plans
Dutch plans
Swiss plan
Italian plans
INSEE tables (2013, 2017-2019 or 2018-2020 depending on plan)
Dr K Heubeck pension tables 2018 G
A.G. Prognosetafel 2018 tables
BVG 2020 – CMI 1.50%
SI 2019
Samples of the ages which pensioners are assumed to live to across the Group’s defined
benefit plans are as follows:
Pensioners aged 65 in 2023
Pensioners aged 65 in 2043
Male
Female
85.8–87.0 88.6–89.2
90.0–91.4
87.6–89.0
Amounts recognised in the
Consolidated Income Statement
2023
£m
2022
£m
2023
£m
2022
£m
2023
£m
UK plan
Overseas plans
Current service cost
Past service credit
Administrative cost
Settlement/curtailment
Net interest cost
–
–
–
–
–
–
–
–
–
–
0.2
0.2
0.7
(0.1)
0.1
–
0.3
1.0
0.4
(0.1)
–
(0.1)
0.1
0.3
0.7
(0.1)
0.1
–
0.3
1.0
Total
2022
£m
0.4
(0.1)
–
(0.1)
0.3
0.5
The current service cost, past service credit, administrative cost and settlement/curtailment are
recognised in administrative expenses in the Consolidated Income Statement. The net interest
cost on the net defined benefit obligation is recognised in finance costs in the Consolidated
Income Statement. Actuarial gains and losses are recognised in the Consolidated Statement of
Comprehensive Income.
During the year, insurance premiums for death-in-service benefits amounting to £0.4m
(2022: £0.4m) were paid.
There was a total return on plan assets in the year of £8.0m (2022: -£32.1m).
Amounts recognised in the
Consolidated Statement
of Comprehensive Income
Actuarial gains/(losses) recognised in the
current year
Foreign exchange gains/(losses) in the
current year
Total gains/(losses) recognised in the
current year
UK plan
Overseas plans
2023
£m
2022
£m
2023
£m
2022
£m
2023
£m
Total
2022
£m
1.4
9.8
(2.0)
3.3
(0.6)
13.1
–
–
0.2
(0.7)
0.2
(0.7)
1.4
9.8
(1.8)
2.6
(0.4)
12.4
Amounts recognised in the
Consolidated Statement of
Financial Position
Present value of defined benefit obligations
Fair value of plan assets
Net surplus/(deficit) in plans
UK plan
Overseas plans
2023
£m
(91.0)
93.4
2.4
2022
£m
(90.6)
90.4
(0.2)
2023
£m
(27.0)
15.4
(11.6)
2022
£m
(22.4)
13.7
(8.7)
2023
£m
(118.0)
108.8
(9.2)
Reconciliation of
movement in net deficit
At 1 January
Balance transferred from other operating
provisions
Current service cost
Net interest cost
Plan administrative cost
Settlement/curtailment
Acquisitions of businesses
Past service credit
Contributions from sponsoring company
and plan members
Benefits paid
Actuarial gains/(losses)
Foreign exchange difference
At 31 December
UK plan
Overseas plans
2023
£m
(0.2)
2022
£m
(11.0)
–
–
–
–
–
–
–
1.2
–
1.4
–
2.4
–
–
(0.2)
–
–
–
–
1.2
–
9.8
–
(0.2)
2023
£m
(8.7)
(1.4)
(0.7)
(0.3)
(0.1)
–
–
0.1
0.7
0.6
(2.0)
0.2
(11.6)
2022
£m
(11.3)
–
(0.4)
(0.1)
–
0.1
(0.5)
0.1
0.3
0.5
3.3
(0.7)
(8.7)
2023
£m
(8.9)
(1.4)
(0.7)
(0.3)
(0.1)
–
–
0.1
1.9
0.6
(0.6)
0.2
(9.2)
Total
2022
£m
(113.0)
104.1
(8.9)
Total
2022
£m
(22.3)
–
(0.4)
(0.3)
–
0.1
(0.5)
0.1
1.5
0.5
13.1
(0.7)
(8.9)
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 166
19. Retirement benefit plans continued
Analysis of movement in the
present value of the defined benefit
obligation
At 1 January
Balance transferred from other operating
provisions
Current service cost
Interest cost
Settlement/curtailment
Acquisitions of businesses
Past service credit
Contributions from plan members
Actuarial losses/(gains) – financial
Actuarial (gains)/losses – demographic
Actuarial losses/(gains) – experience
Benefits paid
Foreign exchange difference
At 31 December
Analysed as:
Present value of unfunded defined benefit
obligation
Present value of funded defined benefit
obligation
UK plan
Overseas plans
2023
£m
2022
£m
90.6
133.2
–
–
4.3
–
–
–
–
1.9
(0.9)
0.5
(5.4)
–
91.0
–
–
2.4
–
–
–
–
(44.5)
(1.2)
6.0
(5.3)
–
90.6
2023
£m
22.4
1.3
0.7
0.7
–
–
(0.1)
0.4
1.8
–
0.5
(0.8)
0.1
27.0
2022
£m
26.5
–
0.4
0.2
(0.1)
2.6
(0.1)
0.2
(7.7)
–
(0.1)
(1.4)
1.9
22.4
Total
2022
£m
2023
£m
113.0
159.7
1.3
0.7
5.0
–
–
(0.1)
0.4
3.7
(0.9)
1.0
(6.2)
0.1
118.0
–
0.4
2.6
(0.1)
2.6
(0.1)
0.2
(52.2)
(1.2)
5.9
(6.7)
1.9
113.0
–
–
8.9
5.0
8.9
5.0
91.0
90.6
18.1
17.4
109.1
108.0
Total
2022
£m
137.4
2.3
–
2.1
1.5
0.2
(34.4)
(6.2)
1.2
104.1
Total
2022
£m
1.7
67.1
12.5
9.0
13.8
104.1
2023
£m
104.1
4.7
(0.1)
0.0
1.9
0.4
3.3
(5.6)
0.1
108.8
2023
£m
3.0
71.5
14.0
4.8
15.5
108.8
Reconciliation of movement
in fair value of plan assets
At 1 January
Interest income on assets
Plan administration cost
Acquisitions of businesses
Contributions from sponsoring company
Contributions from plan members
Actuarial gains/(losses)
Benefits paid
Foreign exchange difference
At 31 December
Fair value of assets
Equity instruments
Corporate bonds
Government bonds
Cash and financial derivatives and
other (net)
Insurance policies
Asset class
i. Equity
ii. Corporate Bonds
iii. Government Bonds
iv. Cash and financial derivatives and
other (net)
v. Insurance contracts
UK plan
Overseas plans
2022
£m
122.2
2.2
–
–
1.2
–
(29.9)
(5.3)
–
90.4
2023
£m
13.7
0.4
(0.1)
–
0.7
0.4
0.4
(0.2)
0.1
15.4
2022
£m
15.2
0.1
–
2.1
0.3
0.2
(4.5)
(0.9)
1.2
13.7
UK plan
Overseas plans
2022
£m
1.7
67.1
12.5
9.0
0.1
90.4
2023
£m
2022
£m
–
–
–
–
15.4
15.4
–
–
–
–
13.7
13.7
2023
£m
90.4
4.3
–
–
1.2
–
2.9
(5.4)
–
93.4
2023
£m
3.0
71.5
14.0
4.8
0.1
93.4
UK plan
Overseas plans
2023
%
3.2
76.6
15.0
5.1
0.1
100.0
2022
%
1.9
74.2
13.8
10.0
0.1
100.0
2023
%
2022
%
–
–
–
–
–
–
–
100.0
100.0
–
100.0
100.0
The UK plan assets are invested in active markets which have a quoted market price. The
overseas plan assets are invested in insurance policies.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 167
19. Retirement benefit plans continued
Sensitivity analysis
The table below shows the sensitivity of the Consolidated Statement of Financial Position to
changes in the significant pension assumptions based on a reasonably expected change given
current market conditions:
Discount rate
Rate of price inflation (RPI)
Assumed life expectancy at age 65
Impact on plan liabilities as at 31 December 2023
Change in
assumption
UK plan
£m
Overseas plans
£m
+1.00%
+1.00%
+1 year
(9.2)
3.0
2.5
(3.0)
1.6
0.7
The sensitivity analysis is approximate and extrapolation beyond the ranges shown may not
be appropriate.
Defined contribution plans
The total cost of the defined contribution plans for the year was £22.9m (2022: £20.1m). There
were no outstanding or prepaid contributions to these plans as at the end of the year.
20. Deferred tax
The movement in the net deferred tax (assets)/liability is shown below.
At 1 January
Measurement period adjustments
Foreign exchange difference
Acquisition of subsidiary undertakings
Disposal of businesses
Transfer of liabilities held for sale
Deferred tax on changes in fair value of forward exchange contracts
recognised in the Consolidated Statement of Comprehensive Income
Deferred tax on re-measurement of net defined benefit liability
recognised in the Consolidated Statement of Comprehensive Income
Deferred tax on share-based payments recognised in equity
Deferred tax charge on discontinued operations
Credited to the Consolidated Income Statement
At 31 December
Comprising:
Deferred tax liabilities
Deferred tax assets
Note
23
7
2023
£m
(0.6)
–
0.3
0.6
(0.6)
(6.0)
2022
£m
1.8
(1.4)
2.0
2.5
(8.6)
–
0.9
(0.1)
0.3
(1.6)
–
(18.6)
(25.3)
1.3
(26.6)
(25.3)
3.4
(0.1)
6.4
(6.5)
(0.6)
15.6
(16.2)
(0.6)
The movements in deferred tax assets and liabilities during the year are shown on the following
table. Deferred tax assets and liabilities are only offset where there is a legally enforceable right
of offset and they relate to income taxes levied by the same taxation authority.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 168
20. Deferred tax continued
Net deferred tax (assets)/liabilities
At 1 January 2023
Foreign exchange difference
Acquisition of subsidiary undertakings
Disposal of businesses
Transfer of liabilities held for sale
Deferred tax on changes in fair value of forward exchange contracts recognised in
the Consolidated Statement of Comprehensive Income
Deferred tax on re-measurement of net defined benefit obligation recognised in
the Consolidated Statement of Comprehensive Income
Deferred tax on share-based payments recognised in equity
(Credited)/charged to the Consolidated Income Statement
At 31 December 2023
Net deferred tax (assets)/liabilities
At 1 January 2022
Measurement period adjustments
Foreign exchange difference
Acquisition of subsidiary undertakings
Disposal of businesses
Deferred tax on changes in fair value of forward exchange contracts recognised in
the Consolidated Statement of Comprehensive Income
Deferred tax on re-measurement of net defined benefit obligation recognised in
the Consolidated Statement of Comprehensive Income
Deferred tax on share-based payments recognised in equity
Discontinued Operations deferred tax charge
Charge/(credited) to the Consolidated Income Statement
At 31 December 2022
Accelerated tax
depreciation
£m
Accruals and
provisions
£m
Unrealised profit
on inter-company
transactions
£m
Tax losses
£m
Pension plans
£m
Goodwill and
other intangible
assets
£m
2.1
–
–
–
(0.8)
–
–
–
–
1.3
(23.4)
–
–
–
2.2
–
–
–
(8.4)
(29.6)
(4.3)
–
–
–
–
–
–
–
(0.4)
(4.7)
(10.5)
0.6
–
–
–
–
–
–
0.5
(9.4)
(2.7)
–
–
–
–
–
0.3
–
0.2
(2.2)
35.1
(0.3)
0.6
(0.6)
(7.4)
–
–
–
(2.6)
24.8
Accelerated tax
depreciation
£m
Accruals and
provisions
£m
0.4
(18.2)
–
–
0.1
–
–
–
0.1
1.5
2.1
–
0.2
0.6
–
–
–
0.4
(6.4)
(23.4)
Unrealised profit
on inter-company
transactions
£m
Tax losses
£m
Pension plans
£m
Goodwill and
other intangible
assets
£m
(0.3)
(1.4)
–
(2.2)
–
–
–
–
–
(0.4)
(4.3)
(7.0)
(6.0)
36.1
–
–
–
–
–
–
–
(3.5)
(10.5)
–
(0.1)
–
–
3.4
–
–
–
(2.7)
2.0
4.6
(9.3)
–
–
–
0.1
1.6
35.1
Other
£m
3.1
–
–
–
–
0.9
–
(1.6)
(7.9)
(5.5)
Other
£m
(3.2)
–
–
–
(0.1)
–
(0.1)
5.8
0.7
3.1
2023
Total
£m
(0.6)
0.3
0.6
(0.6)
(6.0)
0.9
0.3
(1.6)
(18.6)
(25.3)
2022
Total
£m
1.8
(1.4)
2.0
2.5
(8.6)
(0.1)
3.4
(0.1)
6.4
(6.5)
(0.6)
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 169
20. Deferred tax continued
Unrecognised temporary differences
Deferred tax assets have not been recognised on the following temporary differences due to
the degree of uncertainty over both the amount and utilisation of the underlying tax losses
and deductions in certain jurisdictions. £2.0m will expire between 2026 and 2030. There is no
expiry date associated with the remaining tax losses of £19.0m which mainly comprise of UK
capital losses.
Tax losses
2023
£m
21.0
21.0
2022
£m
25.1
25.1
It is likely that the unremitted earnings of overseas subsidiaries would qualify for the UK
dividend exemption such that no UK tax would be due upon remitting these earnings to the
UK. However, £287.1m (2022: £306.6m) of those earnings may still result in a tax liability,
principally as a result of the dividend withholding taxes levied by the overseas tax jurisdictions
in which those subsidiaries operate. These tax liabilities are not expected to exceed £14.9m
(2022: £16.3m), of which only £3.2m (2022: £4.5m) has been provided for as the Group is able to
control the timing of the dividends. It is not expected that further amounts will crystallise in the
foreseeable future.
21. Share capital and reserves
Issued and fully paid (ordinary shares of 5p each):
At 1 January and 31 December
Number of
shares
Millions
105.8
2023
£m
5.3
Number of
shares
Millions
109.1
2022
£m
5.5
During the year ended 31 December 2023, 3,382,896 ordinary shares were repurchased
and cancelled by the Group, in the final tranches of the £300m share buyback programme
announced on 19 April 2022 and part of the first tranche of the £150m share buyback
announced on 11 December 2023. This resulted in a cash outflow of £114.9m, including
transaction fees of £1.2m. The Consolidated Statement of Financial Position also includes an
accrual of £45.9m for the share buyback accrual as at 31 December 2023.
During the year ended 31 December 2022, 6,439,493 ordinary shares were repurchased and
cancelled by the Group as part of the £300m share buyback programme announced on
19 April 2022, resulting in a cash outflow of £191.0m, including transaction fees of £1.2m.
No ordinary shares were issued upon exercise under share option schemes during the year
(2022: nil).
At 31 December 2023, the Group held 4,128,036 treasury shares (2022: 4,596,698). During
the year, 468,662 of these shares were issued to satisfy options exercised by, and SIP
Matching shares awarded to, employees which were granted under the Group’s share schemes
(2022: 170,408).
The Group has an employee benefit trust (EBT), which operates the Spectris Share Incentive
Plan (SIP) to all eligible UK-based employees. The EBT holds shares in Spectris plc for the
purposes of the SIP, further details of which are disclosed in the Directors’ Remuneration
Report. At 31 December 2023, the EBT held 51,807 shares which were purchased from the
market during the year (31 December 2022: 55,570). The costs of funding and administering the
plan are charged to the Consolidated Income Statement in the period to which they relate.
Other reserves
Movements in reserves are set out in the Consolidated Statement of Changes in Equity.
The retained earnings reserve also includes own shares purchased by the Company and
treated as treasury shares. The nature and purpose of other reserves forming part of equity
are as follows:
Translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the
translation of the Financial Statements of foreign subsidiaries, including gains or losses arising
on net investment hedges.
Hedging reserve
This reserve records the cumulative net change in the fair value of forward exchange contracts
where they are designated as effective cash flow hedge relationships.
Merger reserve
This reserve arose on the acquisition of Servomex Limited in 1999, a purchase satisfied
substantially by the issue of share capital and therefore eligible for merger relief under the
provisions of Section 612 of the Companies Act 2006.
Capital redemption reserve
This reserve records the repurchase of the Company’s own shares. During the year, as a
result of the share buyback programme, the capital redemption reserve increased by
£0.2m (2022: £0.3m), reflecting the nominal value of the cancelled ordinary shares.
22. Share-based payments
Spectris Long Term Incentive Plan (LTIP) – awards granted from 2020 onwards with
performance conditions attached
The LTIP is used to grant share awards with performance conditions attached to senior
executives and key employees that are settled in either equity or cash.
Both cash and equity-settled LTIP awards are expected to vest, subject to their performance
conditions, after three years. Vested equity settled awards, which are granted in the form
of nominal share options, must be exercised within the next seven years, whereas vested
conditional share awards and cash-settled awards are paid out on or shortly after the vesting
date. All LTIP awards granted to Executive Directors are subject to an additional two-year
holding period. The Executive Directors’ LTIP awards vest after five years (three-year
performance period plus two-year holding period) and must be exercised within the next
five years.
Subject to the LTIP awards vesting, participants receive additional dividend shares on the
vested shares under the LTIP award. Dividend shares are of equivalent value to the Company’s
dividends paid between the date of grant and the vesting date.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 170
22. Share-based payments continued
Spectris Performance Share Plan (PSP) – awards granted prior to 2020
The PSP was used to grant share awards to senior executives and key employees that are
settled in either equity or cash, however the only outstanding PSP awards remaining are all
settled in equity.
Both cash and equity-settled PSP awards are expected to vest, subject to their performance
conditions, after three years. Vested equity settled awards must be exercised within the next
seven years, whereas vested cash-settled awards are paid out on or shortly after the vesting
date. Outstanding PSP awards granted to Executive Directors are subject to an additional
two-year holding period. The Executive Directors’ PSP awards vest after five years (three-year
performance period plus two-year holding period) and must be exercised within the next
five years.
Subject to the PSP awards vesting, participants receive additional dividend shares on the
vested shares under the PSP award. For PSP awards granted in or after 2014, the dividend
shares are of equivalent value to the Company’s dividends paid between the date of grant and
the vesting date. For PSP awards granted before 2014, dividend shares were of equivalent value
to the Company’s dividends paid between the date of grant and the date of exercise.
Linked (tax-advantaged) awards
Some PSP and LTIP awards granted to UK employees are linked to a grant of market value
share options under the terms of HMRC’s tax-advantaged Company Share Option Plan (Linked
(tax-advantaged) awards). Linked (tax-advantaged) awards are granted up to an aggregate
value of the HMRC’s limit at time of grant (£30,000 up to 5 April 2023, £60,000 from 6 April 2023
onwards). The Linked (tax-advantaged) awards have the same performance and vesting
conditions as the PSP/LTIP awards to which they are linked.
When an employee chooses to exercise a PSP/LTIP award which is linked to a Linked (tax-
advantaged) award, both parts are also automatically exercised at the same time. Should there
be a gain on exercise from the Linked (tax-advantaged) award part, then a proportion of the
PSP/LTIP award will lapse to ensure that the overall gross value received from the combined
exercise of these awards is no more than would have been delivered from a stand-alone
equivalent PSP/LTIP award. Should there be no gain on exercise from the Linked (tax-
advantaged) award part, then this part is forfeited and there is no reduction in the remaining
PSP/LTIP award.
LTIP performance conditions
From 2023 onwards, the LTIP base awards granted to Executive Directors and Executive
Committee members are subject to an adjusted earnings per share growth target, a return on
gross capital employed (ROGCE) target and an Environmental, Social and Governance (ESG)
target. Any vesting under these performance conditions will then be further assessed against
both absolute and relative Total Shareholder Return (TSR) metrics which can potentially
increase the vested award via a multiplier (maximum 1.4 times).
The performance conditions attached to LTIP awards granted to senior managers are two-
ninths EPS, two-ninths ROGCE, two-ninths ESG and the remaining one-third solely subject
to continuous employment over the three-year vesting period. LTIP awards below senior
management level are subject to one-third EPS, one-third ROGCE and one third ESG.
Prior to 2023, LTIP awards did not have any ESG condition so the performance related part
of the LTIP base award was evenly split between the EPS and ROGCE targets and the
TSR multiplier still being applied to Executive Directors and Executive Committee members’
awards.
PSP performance conditions
Outstanding PSP awards granted to Executive Directors were subject to the following
performance conditions: one-third EPS; one-third economic profit (EP); and one-third relative
TSR. The vesting outcome against the PSP performance conditions have been confirmed and
the Executive Directors’ outstanding PSP awards are currently in the additional two-year
holding period.
PSP awards granted to other members of the Executive Committee in 2017 and 2018 were
subject to the following performance conditions: one-third subject to EPS; one-third subject to
EP; and one-third solely subject to continuous employment over the three-year vesting period.
In 2019, the same conditions applied for Head Office Executive Committee roles, however the
EP target was replaced for an operating company profit target for the Executive Committee
members who are Presidents of an operating company.
PSP awards granted to other senior head office managers were, until 2016, 50% subject to EPS
and 50% subject to TSR. From 2017 onwards, senior head office management have two-thirds
of their PSP awards subject to EPS and the remaining one-third solely subject to continuous
employment over the three-year vesting period.
PSP awards granted to executives and senior managers of the Group’s operating companies
until 2016 had two-thirds subject to an operating company profit target and one-third subject
to EPS. In 2017 and 2018, the performance conditions were two-thirds operating company
profit targets and one-third continuous employment over the three-year vesting period.
In 2019, the performance conditions were one-third operating company profit targets,
one-third EPS and one-third continuous employment over the three-year vesting period.
Normally, PSP awards granted to participants who leave employment prior to vesting will be
forfeited. In the event a participant leaves due to a qualifying reason, they receive a time
pro-rated entitlement.
Spectris Reward Plan (SRP) – awards granted from 2020 onwards with no performance
conditions attached
The SRP is used to grant share awards with no performance conditions attached to key
employees that are settled in equity or, in limited circumstances, in cash. SRP awards cannot
be granted to an Executive Director of Spectris plc.
Both cash and equity-settled SRP awards are expected to vest after three years. Vested equity
settled awards, which are granted in the form of nominal share options, must be exercised
within the next seven years, whereas vested conditional share awards and cash-settled awards
are paid out on or shortly after the vesting date.
On vesting, participants receive additional dividend shares on the vested shares under the SRP
award. Dividend shares are of equivalent value to the Company’s dividends paid between the
date of grant and the vesting date.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 171
22. Share-based payments continued
Spectris Deferred Bonus Plan (DBP) – awards granted from 2021 onwards with no
performance conditions attached
The DBP is used to grant share awards with no performance conditions attached to Executive
Directors and are settled in equity. This represents the 50% of the Executive Directors’ annual
bonus that is deferred into shares each year.
DBP awards are expected to vest after three years and must be exercised within the next seven
years. On vesting, the Executive Directors receive additional dividend shares on the vested
shares under the DBP award. Dividend shares are of equivalent value to the Company’s
dividends paid between the date of grant and the vesting date.
Spectris Share Incentive Plan (SIP)
The SIP, a UK tax-advantaged share matching plan, was launched after it was approved by
shareholders at the May 2018 AGM. UK employees can invest up to £150 per month to buy
ordinary shares in the Company (Partnership shares) tax efficiently and for every five
Partnership shares purchased, the Company will gift one free ordinary share (Matching share).
Matching shares need to be held in the SIP Trust for at least three years otherwise these shares
are potentially subject to forfeiture. The Company incurs a charge on any Matching shares
awarded under the SIP. The charge in 2023 was £0.1m (2022: £0.1m).
The number of outstanding share incentives are summarised below:
Incentive plan
Equity-settled:
Long Term Incentive Plan
Performance Share Plan
Long Term Incentive Plan (Linked tax-advantaged)
Performance Share Plan (Linked tax-advantaged)
Spectris Reward Plan
Deferred Bonus Plan
Total equity-settled
Cash-settled:
Long Term Incentive Plan Cash
Spectris Reward Plan Cash
Total cash-settled
Total outstanding
2023
2022
Number
thousands
Number
thousands
1,423
76
92
3
183
57
1,834
64
13
77
1,911
1,385
135
99
8
262
38
1,927
71
15
86
2,013
Share options outstanding at the end of the year (equity settled)
Long Term Incentive Plan,
Performance Share Plan,
Spectris Reward Plan and
Deferred Bonus Plan
Year of grant
2015
2016
2017
2018
2019
2020
2021
2022
2023
Remaining
contractual
life of
options
Number
thousands
PSP
PSP
PSP
PSP
PSP
LTIP/ SRP
LTIP/ SRP/DBP
LTIP/ SRP/DBP
LTIP/ SRP/DBP
2 years
3 years
4 years
5 years
6 years
7 years
8 years
9 years
10 years
1
6
10
11
48
170
428
583
482
1,739
2023
Weighted
average
exercise
price
£
0.05
0.05
0.05
0.05
0.05
0.05
0.05
0.05
0.05
0.05
2022
Weighted
average
exercise
price
£
0.05
0.05
0.05
0.05
0.05
0.05
0.05
0.05
–
0.05
Number
thousands
1
9
37
26
62
515
533
637
–
1,820
The weighted average remaining contractual life of these LTIP, SRP and PSP equity settled
awards is 8.68 years (2022: 8.85 years).
Long Term Incentive Plan,
Spectris Reward Plan and
Performance Share Plan
(equity awards)
At 1 January
Shares granted
Addition of reinvested
dividends
Exercised
Forfeited
At 31 December
Exercisable at 31 December
2023
2022
Weighted
average
exercise
price
£
Weighted
average
fair value at
grant date
£
Number
thousands
Weighted
average
exercise
price
£
Weighted
average
fair value at
grant date
£
Number
thousands
30.22
1,820
508
38
(436)
(191)
1,739
128
0.05
0.05
–
0.05
0.05
0.05
0.05
1,776
711
17
(166)
(518)
1,820
120
0.05
0.05
–
0.05
0.05
0.05
0.05
21.13
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 172
22. Share-based payments continued
Share options outstanding at the end of the year (cash-settled)
Long Term Incentive Plan
and Performance Share Plan
(Linked tax-advantaged)
Year of grant
Remaining
contractual
life of
options
Number
thousands
2017
2018
2019
2020
2021
2022
2023
PSP
PSP
PSP
LTIP
LTIP
LTIP
LTIP
4 years
5 years
6 years
7 years
8 years
9 years
10 years
1
–
2
4
27
38
23
95
2023
Weighted
average
exercise
price
£
26.31
26.77
26.69
22.39
32.01
26.77
34.54
29.99
2022
Weighted
average
exercise
price
£
26.31
25.80
26.69
22.72
31.95
26.76
–
27.11
Number
thousands
1
1
5
29
30
41
–
107
Long Term Incentive Plan,
Spectris Reward Plan and
Performance Share Plan
(Phantom allocations)
Year of grant
2020
2021
2022
2023
LTIP/SRP
LTIP/SRP
LTIP/SRP
LTIP/SRP
Remaining
contractual
life of
options
–
1 year
2 years
3 years
Number
thousands
–
22
28
27
77
2023
Weighted
average
exercise
price
£
–
0.05
0.05
0.05
0.05
2022
Weighted
average
exercise
price
£
0.05
0.05
0.05
–
0.05
Number
thousands
28
27
31
–
86
The weighted average remaining contractual life of the cash-settled awards is 2.06 years
(2022: 1.99 years).
The weighted average remaining contractual life of the PSP and LTIP (Linked tax-advantaged)
awards is 8.77 years (2022: 8.93 years).
Long Term Incentive Plan and
Performance Share Plan
(Linked tax-advantaged)
At 1 January
Shares granted
Exercised
Forfeited
At 31 December
Exercisable at 31 December
2023
2022
Weighted
average
exercise
price
£
Weighted
average
fair value at
grant date
£
Number
thousands
Weighted
average
exercise
price
£
Weighted
average
fair value at
grant date
£
Number
thousands
7.84
107
28
(28)
(12)
95
7
27.11
34.55
23.60
29.86
29.99
24.13
5.81
101
45
(6)
(33)
107
7
27.05
26.74
25.99
26.62
27.11
26.76
Long Term Incentive Plan,
Spectris Reward Plan and
Performance Share Plan
(Phantom allocations)
At 1 January
Shares granted
Addition of reinvested
dividends
Exercised
Forfeited
At 31 December
Exercisable at 31 December
Number
thousands
Exercise
£
86
30
2
(31)
(10)
77
–
0.05
0.05
–
0.05
0.05
0.05
–
2023
Weighted
average
fair value at
grant date
£
34.64
2022
Weighted
average
fair value at
grant date
£
26.93
Number
thousands
Exercise
£
67
33
–
(4)
(10)
86
–
0.05
0.05
–
0.05
0.05
0.05
–
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 173
Notes to the Accounts continued
22. Share-based payments continued
Share-based payment expense
Share options are valued using the stochastic option pricing model (also known as the Monte
Carlo model) in respect of TSR, and the Black-Scholes model for all other options, with support
from an independent remuneration consultant. For options granted in 2023 and 2022, the fair
value of options granted and the assumptions used in the calculation, are as follows:
Equity-settled
Cash-settled
Share awards
LTIP & SRP
(Linked tax-advantaged)
LTIP & SRP
LTIP Cash & SRP Cash
2023
2022
2023
2022
2023
2022
34.68
26.94
34.60
26.97
34.69
26.98
0.05
26.67%
3.36 yrs
3.31%
0.05
28.41%
3.30 yrs
1.37%
34.55
26.61%
3 yrs
3.40%
26.74
28.55%
3.07 yrs
1.39%
34.61
26.67%
3 yrs
3.31%
0.05
28.58%
3 yrs
1.39%
–
–
–
–
–
–
25.19
29.49
29.49
29.49
33.83
10.25
n/a
20.38
20.38
26.48
n/a
7.84
7.84
7.84
7.83
n/a
n/a
5.81
5.81
5.84
n/a
34.64
34.64
34.64
34.64
36.86
36.09
36.86
n/a
n/a
26.91
26.91
26.98
29.09
n/a
29.09
36.81
29.12
Weighted average share
price at date of grant (£)
Weighted average exercise
price (£)
Expected volatility
Expected life
Risk-free rate
Expected dividends
(expressed as a yield)
Weighted average fair
values at date of grant (£):
TSR condition
ESG condition
ROGCE condition
EPS condition
Service condition
Weighted average fair
values at 31 December (£):
ROGCE condition (cash-
settled)
ESG condition (cash-settled)
EPS condition (cash-settled)
Service condition
(cash-settled)
The expected volatility is based on historical volatility over the expected term. The expected life
is the average expected period to exercise. The risk-free rate of return is the yield on zero-
coupon UK government bonds of a term consistent with the assumed option life.
The weighted average share price at the date of exercise for share options exercised in 2023 was
£35.50 (2022: £28.27). The weighted average fair value of cash-settled options outstanding at
31 December 2023 is £36.79 (2022: £29.10). The Group recognised a total share-based payment
charge from continuing and discontinued operations of £14.2m (2022: £11.1m) in the
Consolidated Income Statement, of which £13.1m (2022: £10.4m) related to equity-settled
share-based payment transactions.
23. Acquisitions
2023
MicroStrain
On 19 September 2023, the Group acquired the MicroStrain Sensing Systems business
(MicroStrain) for a gross consideration of £29.1m (consisting of £29.6m of cash paid and
£0.5m estimated completion true-up receivable included in deferred consideration).
MicroStrain is an OEM and retailer of inertial and wireless sensor systems serving industrial and
tactical applications across different industries. The transaction is in line with Spectris’ strategy
to make synergistic acquisitions to enhance and grow its businesses. MicroStrain will be
integrated into the Spectris Dynamics reportable segment and cash generating unit.
The fair value of the assets and liabilities acquired have been provisionally determined based on
the information available at the time. The excess of the fair value of consideration paid over the
fair value of the net tangible assets acquired is represented by the following intangible assets:
customer-related relationships, order book and goodwill. Goodwill arising is attributable to the
assembled workforce, synergies from cross-selling goods and services and cost synergies.
In the Consolidated Income Statement for the year ended 31 December 2023, sales of £3.9m
and statutory operating loss of £0.8m have been included for the acquisition of MicroStrain.
Group revenue and statutory operating profit from continuing operations for the year ended
31 December 2023 would have been £1,461.0m and £189.9m, respectively, had this acquisition
taken place on the first day of the financial year.
Where appropriate, a detailed exercise has been undertaken to assess the fair value of assets
acquired and liabilities assumed, supported by the use of third-party experts. The valuation of
the above intangible and tangible assets requires the use of assumptions and estimates.
Intangible asset assumptions consist of future growth rates, expected inflation and attrition
rates, discount rates used and useful economic lives. Due to their contractual due dates, the fair
value of receivables approximates to the gross contractual amounts receivable. The amount of
gross contractual receivables not expected to be recovered is immaterial. There are no material
contingent liabilities recognised in accordance with IFRS 3 (Revised).
Acquisition-related costs (included in administrative expenses) amount to £1.5m.
EMS
On 2 October 2023, the Group acquired 100% of the share capital of Particle Measuring
Technique Ireland Limited (EMS) and its subsidiaries for net consideration of £6.4m, made up
of £9.0m gross consideration in cash less £2.6m net cash acquired. There was £0.4m deferred
consideration recognised on this acquisition, which is payable at a future date subject to no
unexpected disputes relating to the acquisition arising. EMS is a long-established partner and
exclusive distributor of Spectris Scientific’s PMS products in the UK and Ireland. The transaction
is in line with Spectris’ strategy to make synergistic acquisitions to enhance and grow its
businesses. EMS will be integrated into the Spectris Scientific reportable segment and the PMS
cash generating unit.
The excess of the fair value of consideration paid over the fair value of the net tangible assets
acquired is represented by the following intangible assets: customer-related relationships,
order book and goodwill. Goodwill arising is attributable to the assembled workforce, synergies
from cross-selling goods and services and cost synergies.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 174
23. Acquisitions continued
In the Consolidated Income Statement for the year ended 31 December 2023, sales of £0.4m
and statutory operating loss of £0.2m have been included for the acquisition of EMS. Group
revenue and statutory operating profit from continuing operations for the year ended
31 December 2023 would have been £1,453.9m and £189.6m, respectively, had this acquisition
taken place on the first day of the financial year.
Where appropriate, a detailed exercise has been undertaken to assess the fair value of
assets acquired and liabilities assumed. The valuation of the above intangible and tangible
assets requires the use of assumptions and estimates. Intangible asset assumptions consist
of future growth rates, attrition rates, discount rates used and useful economic lives. Due to
their contractual due dates, the fair value of receivables approximates to the gross contractual
amounts receivable. The amount of gross contractual receivables not expected to be
recovered is immaterial. There are no material contingent liabilities recognised in accordance
with IFRS 3 (Revised).
Acquisition-related costs (included in administrative expenses) amount to £0.3m.
XRD product line
On 27 October 2023, the Group completed a technology and asset purchase agreement with
Freiberg Instruments to acquire the technology to the product line for six X-ray diffraction
(XRD) products for gross consideration of £13.0m. There was £2.6m deferred consideration
recognised on this acquisition. The transaction strengthens Spectris Scientific portfolio in the
semiconductor market. There are no material contingent liabilities recognised in accordance
with IFRS 3 (Revised). The fair value of the net assets is final. The acquisition is included in the
Spectris Scientific reportable segment and the Malvern Panalytical cash generating unit.
The excess of the fair value of consideration paid over the fair value of the net tangible assets
acquired is represented by a technology intangible asset and goodwill. Goodwill arising is
attributable to the synergies from cross-selling goods and services and cost synergies.
In the Consolidated Income Statement for the year ended 31 December 2023, statutory
operating profit included £0.1m of costs relating to the XRD product line. Group revenue and
statutory operating profit for the year ended 31 December 2023 would have been £1,452.0m
and £188.9m, respectively, had this acquisition taken place on the first day of the financial year.
Acquisition-related costs (included in administrative expenses) amounted to £0.8m in 2023.
The fair values included in the table below relate to the acquisition of MicroStrain, EMS and XRD
product line during the year:
Intangible assets
Property, plant and equipment
Right-of-use assets
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Lease liabilities
Current tax liabilities
Deferred tax liabilities
Net assets acquired
Goodwill
Gross consideration
Adjustment for cash acquired
Net consideration
MicroStrain
£m
11.2
0.7
1.0
2.8
0.2
–
(1.0)
(1.0)
–
–
13.9
15.2
29.1
–
29.1
EMS
£m
4.5
–
0.1
0.2
1.4
2.6
(1.5)
–
(0.1)
(0.6)
6.6
2.4
9.0
(2.6)
6.4
Analysis of cash outflow in Consolidated Statement of Cash Flows
Gross consideration in respect of acquisitions during the year
Adjustment for net cash acquired
Net consideration in respect of acquisitions during the year
Deferred and contingent consideration on acquisitions included in net
consideration during the year to be paid in future years
Cash paid during the year in respect of acquisitions during the year
Cash paid in respect of prior years’ acquisitions
Net cash outflow relating to acquisitions
XRD
product line
£m
2023
Total fair
value
£m
6.0
–
–
–
–
–
–
–
–
–
6.0
7.0
13.0
–
13.0
2023
£m
51.1
(2.6)
48.5
(2.5)
46.0
3.5
49.5
21.7
0.7
1.1
3.0
1.6
2.6
(2.5)
(1.0)
(0.1)
(0.6)
26.5
24.6
51.1
(2.6)
48.5
2022
£m
116.8
(1.5)
115.3
(2.2)
113.1
1.6
114.7
2022
Creoptix
On 7 January 2022, the Group acquired 100% of the share capital of Creoptix AG (Creoptix) for
net consideration of £37.0m, made up of £37.3m of gross consideration (consisting of £35.1m
of cash paid and £2.2m of contingent consideration) less £0.3m of cash acquired. Creoptix is
a bioanalytical sensor company, which provides solutions to accelerate discovery and
development of new pharmaceutical drugs, substances and products. The transaction is in line
with Spectris’ strategy to make synergistic acquisitions to enhance and grow its businesses.
Creoptix is included in the Spectris Scientific reportable segment and the Malvern Panalytical
cash generating unit.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 175
23. Acquisitions continued
The excess of the fair value of consideration paid over the fair value of the net tangible assets
acquired is represented by a technology intangible asset and goodwill. Goodwill arising is
attributable to the assembled workforce, in process research, expected future customer
relationships and synergies from cross-selling goods and services.
In the Consolidated Income Statement for the year ended 31 December 2022, sales of £3.9m
and statutory operating loss of £4.2m have been included for the acquisition of Creoptix. As
Creoptix was acquired near to the start of the current reporting period, Group revenue and
statutory operating profit from continuing operations for the year ended 31 December 2022
would be the approximately the same had this acquisition taken place on the first day of the
financial period.
Where appropriate, a detailed exercise has been undertaken to assess the fair value of assets
acquired and liabilities assumed, supported by the use of third-party experts. The valuation of
the above intangible and tangible assets requires the use of assumptions and estimates.
Intangible asset assumptions consist of future growth rates, expected inflation and attrition
rates, discount rates used and useful economic lives. Due to their contractual due dates, the fair
value of receivables approximates to the gross contractual amounts receivable. The amount of
gross contractual receivables not expected to be recovered is immaterial. There are no material
contingent liabilities recognised in accordance with IFRS 3 (Revised).
Acquisition-related costs (included in administrative expenses) amount to £2.8m in 2022.
MB connect line
On 31 March 2022, the Group acquired 100% of the share capital of MB connect line GmbH
(MB connect) for net consideration of £8.7m, made up of £9.0m gross consideration in cash
less £0.3m net cash acquired. There was no contingent consideration recognised on this
acquisition. MB connect is a leading provider of secure connections between machines and
plants for remote access, data collection, and M2M-communication. The transaction is in line
with Spectris’ strategy to make synergistic acquisitions to enhance and grow its businesses.
MB connect is included in the Other non-reportable segments and the Red Lion Controls cash
generating unit.
The excess of the fair value of consideration paid over the fair value of the net tangible assets
acquired is represented by the following intangible assets: customer-related relationships,
technology, brand and goodwill. Goodwill arising is attributable to the assembled workforce,
synergies from cross-selling goods and services and cost synergies.
In the Consolidated Income Statement for the year ended 31 December 2022, sales of £4.2m
and statutory operating profit of £0.5m have been included for the acquisition of MB connect.
Group revenue and statutory operating profit from continuing operations for the year ended
31 December 2022 would have been £1,328.6m and £172.6m, respectively, had this acquisition
taken place on the first day of the financial year.
Where appropriate, a detailed exercise has been undertaken to assess the fair value of assets
acquired and liabilities assumed, supported by the use of third-party experts. The valuation of
the above intangible and tangible assets requires the use of assumptions and estimates.
Intangible asset assumptions consist of future growth rates, expected inflation and attrition
rates, discount rates used and useful economic lives. Due to their contractual due dates, the fair
value of receivables approximates to the gross contractual amounts receivable. The amount of
gross contractual receivables not expected to be recovered is immaterial. There are no material
contingent liabilities recognised in accordance with IFRS 3 (Revised).
Acquisition-related costs (included in administrative expenses) amount to £0.1m in 2022.
Dytran
On 1 September 2022, the Group acquired 100% of the share capital of Dytran Instruments, Inc
(Dytran) for net consideration of £69.6m, made up of £70.5m gross consideration in cash less
£0.9m net cash acquired. There was no contingent consideration recognised on this
acquisition. Dytran is a leading designer and manufacturer of piezo-electric and MEMS-based
accelerometers and sensors for measuring dynamic force, pressure and vibration, with its
largest market in North America. The transaction is in line with Spectris’ strategy to make
synergistic acquisitions to enhance and grow its businesses. The acquisition strengthens
Spectris Dynamics’ piezoelectric offering, adds new MEMS capability and expands sales into
North America. The acquisition also allows both companies to leverage complementary
capabilities and provide enhanced customer offerings and solutions to enable accelerated
product development. Dytran is included in the Spectris Dynamics reportable segment and
cash generating unit.
The excess of the fair value of consideration paid over the fair value of the net tangible assets
acquired is represented by the following intangible assets: customer-related relationships,
brand, order backlog and goodwill. Goodwill arising is attributable to the assembled workforce,
synergies from cross-selling goods and services and cost synergies.
In the Consolidated Income Statement for the year ended 31 December 2022, sales of £8.3m
and statutory operating profit of £1.3m have been included for the acquisition of Dytran. Group
revenue and statutory operating profit from continuing operations for the year ended
31 December 2022 would have been £1,343.5m and £174.3m, respectively, had this acquisition
taken place on the first day of the financial year.
Where appropriate, a detailed exercise has been undertaken to assess the fair value of assets
acquired and liabilities assumed, supported by the use of third-party experts. The valuation of
the above intangible and tangible assets requires the use of assumptions and estimates.
Intangible asset assumptions consist of future growth rates, expected inflation and attrition
rates, discount rates used and useful economic lives. Due to their contractual due dates, the fair
value of receivables approximates to the gross contractual amounts receivable. The amount of
gross contractual receivables not expected to be recovered is immaterial. There are no material
contingent liabilities recognised in accordance with IFRS 3 (Revised).
Acquisition-related costs (included in administrative expenses) amount to £1.9m in 2022.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 176
23. Acquisitions continued
The fair values included in the table below relate to the acquisition of Creoptix, MB connect and
Dytran during 2022:
Intangible assets
Property, plant and equipment
Right of use assets
Inventories
Trade and other receivables
Cash and cash equivalents
Borrowings
Trade and other payables
Retirement benefit obligations
Lease liabilities
Current tax liabilities
Deferred tax liabilities
Net assets acquired
Goodwill
Gross consideration
Adjustment for cash acquired
Net consideration
Creoptix
£m
MB connect
£m
Dytran
£m
18.5
0.1
1.0
0.6
1.6
0.3
–
(1.9)
(0.5)
(1.0)
–
(0.9)
17.8
19.5
37.3
(0.3)
37.0
5.1
1.2
–
0.3
0.1
0.3
(0.1)
(0.1)
–
–
(0.1)
(1.6)
5.1
3.9
9.0
(0.3)
8.7
35.8
1.7
–
5.2
2.9
0.9
–
(2.3)
–
–
–
–
44.2
26.3
70.5
(0.9)
69.6
2022
Total fair
value
£m
59.4
3.0
1.0
6.1
4.6
1.5
(0.1)
(4.3)
(0.5)
(1.0)
(0.1)
(2.5)
67.1
49.7
116.8
(1.5)
115.3
24. Business disposals and disposal groups held for sale
Business disposals
2023
On 31 March 2023, the Group disposed of 100% of the remaining part of its Concept Life
Sciences business, which formed part of the Spectris Scientific Division. The consideration
received was £15.5m, settled in cash received. The divestment was effected to offer a better
opportunity to generate returns for shareholders and further enhance Group margins.
The loss on disposal of the Concept Life Sciences business was calculated as follows:
Goodwill
Other intangible assets
Property, plant and equipment – owned and right-of-use assets
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Lease liabilities
Current and deferred tax liabilities
Net assets of disposed businesses
Consideration received
Settled in cash
Total consideration received
Transaction expenses booked to loss on disposal of business
Net consideration from disposal of business
Net assets disposed of (including cash and cash equivalents held by disposal group)
Loss on disposal of business
Net proceeds recognised in the Consolidated Statement of Cash Flows
Consideration received settled in cash
Cash and cash equivalents held by disposed business
Transaction fees paid
Net proceeds recognised in the Consolidated Statement of Cash Flows in respect of current
year disposals
Payments made in respect of prior years’ disposals of businesses
Tax paid on prior year disposal of businesses
Net proceeds recognised in the Consolidated Statement of Cash Flows
2023
Concept Life
Sciences
£m
3.5
4.1
14.6
0.6
6.1
1.9
(3.0)
(3.6)
(0.6)
23.6
15.5
15.5
(2.2)
13.3
(23.6)
(10.3)
15.5
(1.9)
(2.2)
11.4
(2.2)
(5.9)
3.3
Also included in loss on disposal of business in the Consolidated Income Statement is £2.3m of
transaction costs relating to prior year disposals.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 177
24. Business disposals and disposal groups held for sale continued
2022
On 1 July 2022, the Group disposed of the Omega reportable segment. The consideration
received was £417.9m, settled in cash received. This generated a pre-tax profit on disposal of
£293.9m. The divestment was effected to offer a better opportunity to generate returns for
shareholders and further enhance Group margins.
The profit on disposal of the Omega reportable segment was calculated as follows:
Goodwill
Other intangible assets
Property, plant and equipment – owned and right of use assets
Current tax assets
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Lease liabilities
Current and deferred tax liabilities
Provisions
Net assets of disposed businesses
Consideration received
Settled in cash
Total consideration received
Transaction expenses booked to profit on disposal of business
Net consideration from disposal of business
Net assets disposed of (including cash and cash equivalents held by disposal group)
Currency translation differences transferred from translation reserve
Pre-tax profit on disposal of the Omega reportable segment
Net proceeds recognised in the Consolidated Statement of Cash Flows
Consideration received settled in cash
Cash and cash equivalents held by disposed business
Transaction fees paid
Tax paid on current year disposal of business
Net proceeds recognised in the Consolidated Statement of Cash Flows in respect of current
year disposals
Payments made in respect of prior years’ disposals of businesses
Tax paid on prior year disposal of businesses
Net proceeds recognised in the Consolidated Statement of Cash Flows
2022
Omega
£m
121.3
39.9
20.5
0.1
20.8
18.0
7.7
(19.9)
(3.2)
(8.6)
(0.2)
196.4
417.9
417.9
(14.3)
403.6
(196.4)
86.7
293.9
417.9
(7.7)
(14.3)
(15.3)
380.6
(2.6)
(12.6)
365.4
The Omega reportable segment has been classified as discontinued operations in the
Consolidated Income Statement. The results of these discontinued operations, which have
been included in the profit for the year, were as follows:
Revenue
Expenses included in adjusted operating profit
Adjusted operating profit
Other expenses
Profit before tax
Attributable tax expense
Profit on disposal of discontinued operations
Tax expense attributable to profit on disposal of discontinued operations
Profit after tax from discontinued operations for the year attributable to
owners of the Company
2022
£m
73.9
(59.9)
14.0
(1.1)
12.9
(2.7)
10.2
293.9
(17.4)
286.7
During 2022, discontinued operations contributed £6.5m to the Group’s net cash inflow from
operating activities, received £379.8m in respect of investing activities and paid £0.5m in
respect of financing activities.
Disposal groups held for sale
2023
On 11 December 2023, the Group announced that agreement had been reached for the sale
of the Group’s Red Lion Controls business, which forms part of the Other operating segment.
The required regulatory approvals were received in January and February 2024 and the
completion of the Red Lion Controls business sale is expected to take place during the second
quarter of 2024.
The above operation, which is expected to be sold within 12 months, has been classified as a
disposal group held for sale and presented separately in the Consolidated Statement of
Financial Position.
The proceeds from the disposal of the Red Lion Controls business are expected to exceed the
book value of the related net assets and accordingly no impairment losses have been
recognised on the classification of these operations as held for sale.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 178
24. Business disposals and disposal groups held for sale continued
The major classes of assets and liabilities comprising the operations classified as held for sale at
31 December 2023 are as follows:
25. Cash generated from operations
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets classified as held for sale
Derivative financial instruments
Trade and other payables
Provisions
Lease liabilities
Current tax liabilities
Deferred tax liabilities
Total liabilities classified as held for sale
Net assets of disposal group
2023
£m
46.0
8.9
8.3
0.8
22.9
10.3
0.3
97.5
(0.1)
(9.4)
(0.9)
(0.8)
(0.6)
(6.0)
(17.8)
79.7
The net assets held for sale in the year did not meet the definition of discontinued operations
given in IFRS 5 ‘Non-Current Assets Held for Sale and Discontinued Operations’ and, therefore,
no disclosures in relation to discontinued operations were made.
2022
Assets classified as held for sale at 31 December 2022 consist of the Group’s former
headquarters building in Egham, Surrey, UK.
The assets held for sale in the period did not meet the definition of discontinued operations
given in IFRS 5 ‘Non-Current Assets Held for Sale and Discontinued Operations’ and, therefore,
no disclosures in relation to discontinued operations were made.
Cash flows from operating activities
Profit after tax
Adjustments for:
Taxation charge
Share of post-tax results of associates
Loss/(profit) on disposal of businesses
Finance costs
Financial income
Depreciation and impairment of property, plant and equipment
Amortisation, impairment and other non-cash adjustments made to
intangible assets
Transaction-related fair value adjustments
Fair value through profit and loss movements on debt investments
Profit on disposal and re-measurements of property, plant and
equipment and associated lease liabilities
Equity-settled share-based payment expense
Operating cash flow before changes in working capital
and provisions
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventories
(Decrease)/increase in trade and other payables
Decrease in provisions and retirement benefits
Cash generated from operations
Note
2023
£m
2022
£m
145.4
401.5
24
6
6
11
10
27
27
5
40.2
0.1
12.6
4.1
(11.0)
32.8
24.9
7.5
(2.8)
(0.5)
13.1
266.4
16.0
1.5
(33.0)
(5.4)
245.5
56.8
(294.2)
19.2
(1.9)
34.8
26.3
1.0
4.1
(1.5)
10.4
256.5
(47.9)
(75.6)
40.9
(7.1)
166.8
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 179
26. Financial risk management
The Group’s multinational operations and debt financing expose it to a variety of financial risks.
In the course of its business, the Group is exposed to foreign currency risk, interest rate risk,
liquidity risk and credit risk. Financial risk management is an integral part of the way the Group
is managed. Financial risk management policies are set by the Board of Directors. These
policies are implemented by a central treasury department that has formal procedures to
manage foreign exchange risk, interest rate risk and liquidity risk, including, where appropriate,
the use of derivative financial instruments. The Group has clearly defined authority and
approval limits. The central treasury department operates as a service centre to the Group and
not as a profit centre.
In accordance with its treasury policy, the Group does not hold or use derivative financial
instruments for trading or speculative purposes. Such instruments are only used to manage
the risks arising from operating or financial assets or liabilities, or highly probable future
transactions. The quantitative analysis of financial risk is included in note 27.
Foreign currency risk
Foreign currency risk arises both where sale or purchase transactions are undertaken in
currencies other than the respective functional currencies of Group companies (transactional
exposures) and where the results of overseas companies are consolidated into the Group’s
reporting currency of Sterling (translational exposures). The Group has operations around
the world which record their results in a variety of different local functional currencies. In
countries where the Group does not have operations, it invariably has some customers or
suppliers that transact in a foreign currency. The Group is therefore exposed to the changes
in foreign currency exchange rates between a number of different currencies, but the Group’s
primary exposures relate to the US Dollar, Euro, Chinese Yuan Renminbi and Japanese Yen.
Where appropriate, the Group manages its foreign currency exposures using derivative
financial instruments.
The Group’s translational exposures to foreign currency risks can relate both to the
Consolidated Income Statement and net assets of overseas subsidiaries. The Group’s policy
is not to hedge the translational exposure that arises on consolidation of the Consolidated
Income Statement of overseas subsidiaries. The Group finances overseas company
investments partly through the use of foreign currency borrowings in order to provide a
natural hedge of foreign currency risk arising on translation of the Group’s foreign currency
subsidiaries. The quantitative analysis of foreign currency risk is included in note 27.
The Group manages its transactional exposures to foreign currency risks through the use of
forward exchange contracts. Forward exchange contracts are used to hedge highly probable
transactions which can be forecast to occur typically up to 18 months into the future. For the
hedges of highly probable forecast sales and purchases, as the critical terms (i.e. the notional
amount, life and the underlying) of the forward exchange contracts and their corresponding
hedged items are the same, the Group performs a qualitative assessment of effectiveness and
it is expected that the value of the forward contracts and the value of the corresponding
hedged items will systematically change in opposite directions in response to movements in
the underlying exchange rates.
The main potential source of hedge ineffectiveness in these hedging relationships is the
effect of the counterparty and the Group’s own credit risk on the fair value of the forward
contracts, which is not reflected in the fair value of the hedged item attributable to changes
in foreign exchange rates. No other sources of ineffectiveness emerged from these
hedging relationships.
The following tables detail the foreign currency forward contracts outstanding at the end of the
reporting period, as well as information regarding their related hedged items. Foreign currency
forward contract assets and liabilities are presented in the line ‘Derivative financial instruments’
(either as assets or liabilities) within the Consolidated Statement of Financial Position.
Hedging instruments – outstanding contracts
Cash flow hedges1
Currency risk – forward exchange contracts
Less than 6 months
6 to 12 months
12 to 18 months
Change in fair value for
recognising hedge
ineffectiveness
Carrying amount of the
hedging instruments
2023
£m
2022
£m
2023
£m
2022
£m
4.2
1.5
0.3
6.0
(0.8)
(0.1)
0.1
(0.8)
4.2
1.5
0.3
6.0
(0.8)
(0.1)
0.1
(0.8)
1. Cash flow hedges includes £0.1m liability in liabilities held for sale split evenly between less than six months and
six to 12 months.
Hedging instruments – hedged items
Currency risk
Forecast sales1
Change in value used for
calculating hedge
effectiveness
Balance in cash flow
hedge reserve/foreign
currency translation
reserve for continuing
hedges
2023
£m
2022
£m
2023
£m
2022
£m
(6.0)
0.8
(6.0)
0.8
1. Cash flow hedges includes £0.1m liability in liabilities held for sale split evenly between less than six months and
six to 12 months.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 180
26. Financial risk management continued
Interest rate risk
Interest rate risk comprises both the interest rate price risk that results from borrowing at fixed
rates of interest and also the interest cash flow risk that results from borrowing at variable rates.
Where appropriate, interest rate swaps are used to manage the Group’s interest rate profile.
Liquidity risk
Liquidity risk represents the risk that the Group will not be able to meet its financial obligations
as they fall due. The Group’s approach to managing this risk is to ensure, as far as possible, that
it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Group’s
reputation. The Group manages this risk through the use of regularly updated cash flow and
covenant compliance forecasts and a liquidity headroom analysis which is used to determine
funding requirements. Adequate committed lines of funding are maintained from high-quality
investment grade lenders. The facilities committed to the Group as at 31 December 2023 are
set out in note 16.
Credit risk
Credit risk arises because a counterparty may fail to perform its obligations. The Group is
exposed to credit risk on financial assets, such as cash balances, derivative financial
instruments and trade and other receivables.
The Group’s credit risk is primarily attributable to its trade receivables. The amounts recognised
in the Consolidated Statement of Financial Position are net of appropriate allowances for
doubtful receivables, estimated by the Group’s management based on whether receivables
are past due based on contractual terms, payment history and other available evidence of
collectability. Trade receivables are subject to credit limits and control and approval procedures
in the operating companies. Due to its large geographical base and number of customers, the
Group is not exposed to material concentrations of credit risk on its trade receivables. The
quantitative analysis of credit risk relating to receivables is included in note 14.
Credit risk associated with cash balances and derivative financial instruments is managed
centrally by transacting with existing relationship banks with strong investment grade ratings,
with a S&P LT Issuer Rating range of AAA to BBB-. Accordingly, the Group’s associated credit
risk is limited. The Group has no significant concentration of credit risk.
The Group’s maximum exposure to credit risk is represented by the carrying amount of each
financial asset, including derivative financial instruments, as shown in note 27.
Capital management
The Board considers equity shareholders’ funds, together with undrawn committed debt
facilities, as capital for the purposes of funding the Group’s operations.
Total managed capital at 31 December is:
Equity shareholders’ funds
Undrawn committed debt facilities
2023
£m
1,315.9
393.1
1,709.0
2022
£m
1,436.9
414.9
1,851.8
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue
of ordinary shares and share options are recognised as a deduction from equity, net of any
tax effects.
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and
market confidence and to sustain the future development of the business. The Board of
Directors monitors both the geographic spread of shareholders and the level of dividends to
ordinary shareholders.
The Board encourages employees to hold shares in the Company. This is carried out through
the Spectris Share Incentive Plan in the UK, as well as Long-Term Incentive, Performance and
Restricted Share Plans. Full details of these schemes are given in note 22.
The main financial covenants in the Company’s debt facilities are the ratio of net debt to
adjusted earnings before interest, tax, depreciation and amortisation, and the ratio of finance
charges to adjusted earnings before interest, tax, amortisation and impairment. Covenant
testing is completed twice a year based on the half-year and year-end Financial Statements.
At 31 December 2023, the Company had, and is expected to continue to have, significant
headroom under these financial covenant ratios.
From time to time the Group purchases its own shares in the market; the timing of these
purchases depends on market prices. Buy and sell decisions are made on a specific transaction
basis by the Board. During the year ended 31 December 2023, 3,382,896 ordinary shares were
repurchased and cancelled by the Group resulting in a cash outflow of £114.9m, including
transaction fees of £1.2m. On the 11 December 2023 the Group announced a further
£150.0m share buyback programme, of which the first tranche of £50.0m commenced in
December 2023.
There were no changes to the Group’s approach to capital management during 2023 and 2022.
Neither the Company nor any of its subsidiaries is subject to externally imposed capital
requirements.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
181
27. Financial instruments
The following tables show the fair value measurement of financial instruments by level
following the fair value hierarchy:
> Level 1: quoted listed stock exchange prices (unadjusted) in active markets for identical
assets;
> Level 2: inputs other than quoted prices included within level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
> Level 3: inputs for assets and liabilities derived from valuation techniques that include inputs
for the asset or liability that are not based on observable market data.
Fair value and carrying amount of financial instruments
Trade and other receivables excluding prepayments and
contract assets
Trade and other payables excluding contract liabilities
and customer advances
Investments in equity instruments designated at initial
recognition at fair value through other comprehensive
income (see note 12)
Investment in debt instruments
Financial instruments included in assets held for sale (see
note 24)
Financial instruments included in liabilities held for sale
(see note 24)
Forward exchange contract assets
Cash and cash equivalents
Forward exchange contract liabilities
Level 1
fair value
£m
Level 2
fair value
£m
Level 3
fair value
£m
2023
Carrying
amount
£m
–
–
0.4
–
–
–
–
–
–
–
–
–
–
0.3
(0.1)
6.2
138.5
(0.1)
0.5
284.6
(10.6)
(263.2)
23.9
21.7
–
(1.3)
–
–
–
24.3
21.7
10.6
(9.5)
6.2
138.5
(0.1)
213.1
Fair value and carrying amount of financial instruments
Trade and other receivables excluding prepayments and
contract assets
Trade and other payables excluding contract liabilities
and customer advances
Investments in equity instruments designated at initial
recognition at fair value through other comprehensive
income (see note 12)
Investment in debt instruments
Forward exchange contract assets
Cash and cash equivalents
Forward exchange contract liabilities
Level 1
fair value
£m
Level 2
fair value
£m
Level 3
fair value
£m
2022
Carrying
amount
£m
–
–
0.7
–
–
–
–
–
–
–
–
1.7
228.1
(2.5)
–
327.3
(3.3)
(236.8)
28.6
18.9
–
–
–
29.3
18.9
1.7
228.1
(2.5)
366.0
There were no movements between the different levels of the fair value hierarchy in the year.
The fair value of floating rate borrowings approximates to the carrying amount because
interest rates are at floating rates where payments are reset to market rates at intervals of less
than one year.
The fair value of fixed rate borrowings is estimated by discounting the future contracted cash
flow, using appropriate yield curves, to the net present values.
The level 1 £0.4m (2022: £0.7m) of investments in equity instruments is calculated using quoted
market prices in an active market at the balance sheet date.
The level 2 fair value of forward exchange contracts is determined using discounted cash flow
techniques based on readily available market data.
The fair value of forward exchange contracts outstanding as at 31 December 2023 is a net asset
of £6.0m including a £0.1m liability in liabilities held for sale (2022: liability £0.8m), of which
£2.0m has been debited from the hedging reserve (2022: credit of £3.0m) and £4.5m credited
to the Consolidated Income Statement (2022: £3.7m debited). These contracts mature over
periods typically not exceeding 18 months. A summary of the movements in the hedging
reserve during the year is presented below. All of the cash flow hedges in 2023 and 2022 were
deemed to be effective.
The level 2 and level 3 fair value of cash and cash equivalents, receivables and payables
approximates to the carrying amount because of the short maturity of these instruments.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 182
27. Financial instruments continued
The level 3 fair value of deferred and contingent consideration is determined by considering
the performance expectations of the acquired or disposed entity or the likelihood of non-
financial integration milestones whilst applying the entity-specific discount rates. The
unobservable inputs are the projected forecast measures that are assessed on an annual basis.
Changes in the fair value of deferred and contingent consideration relating to updated
projected forecast performance measures are recognised in the Consolidated Income
Statement within administrative expenses in the Consolidated Income Statement in the period
that the change occurs.
Deferred and contingent consideration relates to financial (2023: £0.9m, 2022: £0.7m) and
non-financial (2023: £9.3m, 2022: £2.6m) milestones on current and prior year acquisitions.
The financial milestones are mainly sensitive to annual future revenue targets.
Reconciliation of level 3 fair value for deferred and contingent consideration receivable/payable
on acquisitions
At 1 January
Deferred and contingent consideration arising from current year acquisitions
payable in future years
Deferred and contingent consideration arising from current year acquisitions
receivable in future years
Deferred and contingent consideration paid in the current year relating to previous
years’ acquisitions
Deferred and contingent consideration transferred to liabilities held for sale
Costs charged to the Consolidated Income Statement:
Subsequent adjustments on acquisitions and disposals
Foreign exchange difference
At 31 December
2023
£m
(3.3)
2022
£m
(1.5)
(3.0)
(2.2)
0.5
1.9
1.3
(7.5)
–
(10.1)
–
1.6
–
(1.0)
(0.2)
(3.3)
The level 3 £23.9m (2022: £28.6m) of investment in equity instruments consists of the
investment units in EZ Ring FPCI, the fund holding the combined UTAC-Millbrook group. This
investment is recognised at fair value, using the income approach, with the key input being a
discounted cash flow. A 1% to 5% decrease in net asset value per share would cause a £0.3m to
£1.4m decrease in the fair value.
Reconciliation of level 3 fair value for investment in equity instruments
At 1 January
Fair value movement on level 3 investment in equity instruments
Foreign exchange difference
At 31 December
2023
£m
28.6
(4.2)
(0.5)
23.9
2022
£m
23.1
4.1
1.4
28.6
The level 3 £21.7m (2022: £18.9m) of investment in debt instruments consists of a vendor loan
note receivable received as part of the sales proceeds from the Millbrook business disposal in
2021. This investment is recognised at fair value by establishing an appropriate market yield.
The key inputs used were synthetic credit ratings and market interest rates. The Group has
performed sensitivity analysis of reasonable possible changes in key inputs. A 1% decrease in
market interest rates would cause a £0.7m increase in the fair value and 1% increase would
cause a £0.7m decrease in the fair value.
Reconciliation of level 3 fair value for investment in debt instruments
At 1 January
Fair value movement on level 3 investment in debt instruments
At 31 December
Analysis of movements in hedging reserve, net of tax
At 1 January
Amounts removed from the Consolidated Statement of Changes in Equity and
included in the Consolidated Income Statement during the year
Amounts recognised in the Consolidated Statement of Changes in Equity during
the year
At 31 December
2023
£m
18.9
2.8
21.7
2023
£m
(3.1)
(4.5)
9.5
1.9
2022
£m
23.0
(4.1)
18.9
2022
£m
(3.5)
3.7
(3.3)
(3.1)
The amount included in the Consolidated Income Statement is split between revenue and
administrative expenses depending on the nature of the hedged item.
The following table shows the total outstanding contractual forward exchange contracts
hedging designated transactional exposures split by currencies which have been sold back
into the functional currency of the underlying business. These contracts typically mature in the
next 18 months and, therefore, the cash flows and resulting effect on the Consolidated Income
Statement are expected to occur within this time period.
Forward exchange contracts at 31 December
Foreign currency sale amount (£m)
Percentage of total:
US Dollar
Chinese Yuan Renminbi
Euro
Japanese Yen
Other
2023
£m
175.4
44%
23%
10%
14%
9%
2022
£m
117.2
36%
25%
15%
15%
9%
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 183
27. Financial instruments continued
A maturity profile of the gross cash flows related to financial liabilities is:
Maturity of financial liabilities1
Due within one year
Due between one and two years
1. Includes £0.1m in liabilities held for sale.
Derivative
financial
liabilities
Overdrafts
£m
Unsecured
loans
£m
0.1
0.1
0.2
–
–
–
–
–
–
2023
Total
£m
0.1
0.1
0.2
Derivative
financial
liabilities
2.3
0.2
2.5
Overdrafts
£m
Unsecured
loans
£m
0.1
–
0.1
–
–
–
2022
Total
£m
2.4
0.2
2.6
Trade and other payables (note 17) are substantially due within one year.
It is not expected that the cash flows described above could occur significantly earlier or at substantially different amounts.
Interest rate exposure of financial assets and liabilities by currency1
Sterling
Euro
US Dollar
Other
1. Includes £0.1m in liabilities held for sale.
Interest rate exposure of financial assets and liabilities by currency
Sterling
Euro
US Dollar
Other
Financial assets
Floating
rate
£m
Non interest
bearing
£m
1.9
0.6
4.2
23.9
30.6
7.1
19.5
17.4
19.2
63.2
Total
£m
44.1
22.1
26.1
46.5
138.8
Floating
rate
£m
Non interest
bearing
£m
13.7
0.5
5.1
36.2
55.5
8.2
21.9
19.6
31.0
80.7
Financial assets
Total
£m
112.1
22.5
26.1
67.4
228.1
Fixed
rate
£m
35.1
2.0
4.5
3.4
45.0
Fixed
rate
£m
90.2
0.1
1.4
0.2
91.9
Fixed
rate
£m
Floating
rate
£m
–
–
–
–
–
Fixed
rate
£m
–
–
(0.1)
–
(0.1)
–
–
–
–
–
Floating
rate
£m
–
–
–
–
–
Financial liabilities
2023
Net financial
assets
£m
44.1
22.1
26.1
46.5
138.8
Financial liabilities
2022
Net financial
assets
£m
112.1
22.5
26.0
67.4
228.0
Total
£m
–
–
–
–
–
Total
£m
–
–
(0.1)
–
(0.1)
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 184
27. Financial instruments continued
Sensitivity analysis
The tables below show the Group’s sensitivity to foreign exchange rates and interest rates.
The US Dollar, Euro, Danish Krone and Chinese Yuan Renminbi represent the main foreign
exchange translational exposures for the Group.
Impact on foreign exchange translational
exposures against Sterling
10% weakening in the US Dollar
10% weakening in the Euro/Danish Krone
10% weakening in the Chinese Yuan
Renminbi
Impact of interest rate movements
1pp increase in interest rates
2023
Decrease/
(increase) in
profit before tax
from continuing
operations
£m
7.9
8.0
2.0
Decrease/
(increase) in
equity
£m
128.3
78.4
4.2
2022
Decrease/
(increase) in
profit before tax
from continuing
operations
£m
6.9
4.8
3.6
Decrease/
(increase) in
equity
£m
130.2
78.0
5.5
(0.3)
(0.3)
(0.6)
(0.6)
28. Contingent liabilities
In the normal course of business, Group companies have provided bonds and guarantees
through local banking arrangements amounting to £22.7m (2022: £20.4m). Contingent
liabilities in respect of taxation are disclosed in note 7.
29. Lease liabilities
Undiscounted lease liability
maturity analysis under IFRS 16
Property
£m
Less than one year
One to five years
More than five years
Total undiscounted lease
liabilities at 31 December
Plant and
equipment
£m
3.6
5.2
–
2023
Total
£m
13.3
29.0
33.9
Property
£m
Plant and
equipment
£m
10.8
25.0
34.9
3.1
3.9
0.1
2022
Total
£m
13.9
28.9
35.0
9.7
23.8
33.9
67.4
8.8
76.2
70.7
7.1
77.8
The total cash outflow on lease liabilities made in the year was £15.6m (2022: £16.4m).
30. Capital commitments
At 31 December 2023, the Group had entered into contractual commitments for the purchase
of property, plant and equipment and software amounting to £3.1m (2022: £1.7m) and £0.1m
(2022: £nil), respectively, which have not been accrued.
31. Related party transactions
The Group has related party relationships with its subsidiaries (a list of all related undertakings
is shown in note 14 of the Company Financial Statements) on pages 199 to 202, with its
associate and with its Executive Directors and members of the Executive Management
Committee.
Transactions with key management personnel
The remuneration of key management personnel during the year was as follows:
Short-term benefits
Post-employment benefits
Equity-settled share-based payment expense
2023
£m
6.8
0.1
3.5
10.4
2022
£m
7.2
0.1
3.1
10.4
In accordance with IAS 24 ‘Related Party Disclosures’, key management personnel are those
having authority and responsibility for planning, directing and controlling the activities of the
Group, directly or indirectly. Key management personnel comprise the Directors and the other
members of the Executive Management Committee.
Further details of the Executive Directors’ remuneration are included in the Directors’
Remuneration Report on pages 102 to 123.
Transactions with associates
There were no related party transactions and no balance payables/receivable with the Group’s
associates, CM Labs and LumaCyte, in 2023 (2022: £nil). See note 12 for further details.
There were no other related party transactions in either 2023 or 2022.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 32. Subsidiary undertakings
The table below lists the Group’s principal subsidiary undertakings at 31 December 2023.
They operate mainly in the countries of incorporation. All of the subsidiaries are involved in the
manufacture and sale of highly-specialised measuring instruments and controls, together with
the provision of services.
Spectris plc holds 100% of the ordinary share capital of all the subsidiaries either directly or
indirectly through intermediate holding companies.
Name
Malvern Panalytical Limited
Servomex Group Limited
Hottinger Brüel & Kjær GmbH
Particle Measuring Systems, Inc.
Red Lion Controls, Inc.
Country of incorporation
England & Wales
England & Wales
Germany
USA
USA
A full list of subsidiaries is given in note 14 of the Company Financial Statements on pages 199
to 202.
33. Events after the balance sheet date
There were no material post balance sheet events.
185
Appendix – Alternative performance measures
Policy
Spectris uses adjusted and underlying figures as key performance measures in addition to
those reported under IFRS, as management believe these measures enable management and
stakeholders to assess the underlying performance of the businesses as they exclude certain
items that are considered to be significant in nature or quantum, foreign exchange
movements and the impact of acquisitions and disposals.
The alternative performance measures (APMs) are consistent with how the businesses’
performance is planned and reported within the internal management reporting to the Board
and Operating Committees. Some of these measures are used for the purpose of setting
remuneration targets. The key APMs that the Group uses include like-for-like (LFL) organic
performance measures and adjusted measures for the income statement together with
adjusted financial position and cash flow measures. Explanations of how they are calculated
and how they are reconciled to an IFRS statutory measure are set out below.
Adjusted measures
The Group’s policy is to exclude items that are considered to be significant in nature or
quantum and where treatment as an adjusted item provides stakeholders with additional
useful information to better assess the period-on-period trading performance of the Group.
Some of these items are material in nature and the costs are expected to be incurred over
more than one reporting period.
The Group excludes such items which management have defined for 2023 and 2022 as:
Items excluded
Amortisation of acquisition-related intangible assets
Depreciation of acquisition-related fair value adjustments to property, plant and
equipment
Transaction-related costs, deferred and contingent consideration fair value
adjustments
Spectris Foundation Contribution1
Configuration and customisation costs carried out by third parties on material
SaaS projects1
Profits or losses on disposal of businesses
Unrealised changes in the fair value of financial instruments
Fair value through profit and loss movements on debt investments
Gains or losses on retranslation of short-term inter-company loan balances
Related tax effects on the above and other tax items which do not form part of the
underlying tax rate (see note 7)
Significant
in nature/
quantum
Nature
Nature
Nature
Nature
Quantum
Nature
Nature
Nature
Nature
Dependent on
above classification
1. Multi-year project, where the cost is expected to continue beyond the current reporting period.
LFL measures
Reference is made to LFL and organic measures throughout this document. LFL and organic
have the same definition, as set out below.
The Board reviews and compares current and prior year segmental sales and adjusted
operating profit at constant exchange rates and excludes the impact of acquisitions and
disposals during the year.
Notes to the Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
186
Appendix – Alternative performance measures continued
The constant exchange rate comparison uses the current year segmental information, stated in
each entity’s functional currency, and translates the results into its presentation currency using
the prior year’s monthly exchange rates, irrespective of the underlying transactional currency.
The incremental impact of business acquisitions is excluded for the first 12 months of
ownership from the month of purchase. For business disposals, comparative figures for
segmental sales and adjusted operating profit are adjusted to reflect the comparable periods
of ownership.
On 31 March 2023, the Concept Life Sciences business was disposed of and, as a result, the
segmental LFL adjusted sales and adjusted operating profit for the Spectris Scientific segment
for 2022 exclude the trading results of the Concept Life Sciences business for the period from
April 2022 to December 2022.
The Omega business has been classified as a discontinued operation under IFRS 5, following
the completion of its disposal on 1 July 2022. As a result, the financial data for 2022 excludes the
trading results of the Omega business.
The LFL measure is presented as a means of eliminating the effects of exchange rate
fluctuations on the period-on-period statutory results as well as allowing the Board to assess
the underlying trading performance of the businesses on a LFL basis for both sales and
operating profit.
Based on the above policy, the adjusted performance measures are derived from the statutory
figures as follows:
Income statement measures
a) LFL adjusted sales by segment
2023 LFL adjusted sales versus 2022 LFL adjusted sales
2023 sales by segment
Sales
Constant exchange rate adjustment to 2022
exchange rates
Acquisitions
LFL adjusted sales
2022 sales by segment
Sales
Disposal of businesses
LFL adjusted sales
Spectris
Scientific
£m
Spectris
Dynamics
£m
Other
£m
2023
Total
£m
704.2
542.8
202.2
1,449.2
13.2
(0.4)
717.0
1.9
(21.3)
523.4
Spectris
Scientific
£m
Spectris
Dynamics
£m
657.8
(17.7)
640.1
492.2
–
492.2
0.9
(1.4)
201.7
Other
£m
177.4
–
177.4
16.0
(23.1)
1,442.1
2022
Total
£m
1,327.4
(17.7)
1,309.7
b) Adjusted operating profit and operating margin
2023 LFL adjusted operating profit versus 2022 LFL adjusted operating profit
2023 adjusted operating profit
Statutory operating profit
Net transaction-related costs and fair value
adjustments
Spectris Foundation Contribution
Configuration and customisation costs
carried out by third parties on material SaaS
projects
Amortisation of acquisition-related
intangible assets
Adjusted operating profit
Constant exchange rate adjustment to 2022
exchange rates
Acquisitions
LFL adjusted operating profit
2022 adjusted operating profit
Statutory operating profit
Net transaction-related costs and fair value
adjustments
Depreciation of acquisition-related fair value
adjustments to property, plant and
equipment
Configuration and customisation costs
carried out by third parties on material SaaS
projects
Amortisation of acquisition-related
intangible assets
Adjusted operating profit
Disposal of businesses
LFL adjusted operating profit
Spectris
Scientific
£m
Spectris
Dynamics
£m
124.4
56.2
6.4
–
3.1
–
Other
£m
33.2
4.5
–
Group
costs
£m
(25.2)
–
1.0
2023
Total
£m
188.6
14.0
1.0
19.4
20.6
–
–
40.0
5.0
155.2
1.5
0.2
156.9
13.2
93.1
0.5
(2.5)
91.1
0.7
38.4
(0.1)
(0.3)
38.0
–
(24.2)
–
–
(24.2)
Spectris
Scientific
£m
Spectris
Dynamics
£m
Other
£m
Group costs
£m
18.9
262.5
1.9
(2.6)
261.8
2022
Total
£m
118.3
46.5
26.2
(18.4)
172.6
5.1
2.8
0.4
0.2
–
8.7
13.0
7.7
140.0
(0.7)
139.3
11.3
73.6
–
73.6
–
–
0.6
27.2
–
27.2
–
–
–
–
(18.4)
–
(18.4)
8.3
0.2
21.7
19.6
222.4
(0.7)
221.7
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Appendix – Alternative performance measures continued
2023 operating margin
Statutory operating margin1
Adjusted operating margin2
LFL adjusted operating margin3
2022 operating margin
Statutory operating margin1
Adjusted operating margin2
LFL adjusted operating margin3
Spectris
Scientific
%
Spectris
Dynamics
%
17.7
22.0
21.9
10.4
17.2
17.4
Spectris
Scientific
%
Spectris
Dynamics
%
18.0
21.3
21.8
9.4
15.0
15.0
Other
%
16.4
19.0
18.8
Other
%
14.8
15.3
15.3
2023
Total
%
13.0
18.1
18.2
2022
Total
%
13.0
16.8
16.9
1. Statutory operating margin is calculated as statutory operating profit divided by sales.
2. Adjusted operating margin is calculated as adjusted operating profit divided by sales.
3. LFL adjusted operating margin is calculated as LFL adjusted operating profit divided by LFL adjusted sales. Refer
to the tables above for a reconciliation of the nearest GAAP measure (sales/operating profit respectively) to LFL
adjusted sales/LFL adjusted operating profit.
c) LFL adjusted gross profit and adjusted gross margin
2023 LFL adjusted gross profit versus 2022 LFL adjusted gross profit
2023 adjusted gross profit
Statutory gross profit
Constant exchange rate adjustment to 2022 exchange rates
Acquisitions
LFL adjusted gross profit
2022 adjusted gross profit
Statutory gross profit
Disposal of businesses
LFL adjusted gross profit
2023 gross margin
Statutory gross margin1
LFL adjusted gross margin2
2022 gross margin
Statutory gross margin1
LFL adjusted gross margin2
2023
Total
£m
838.1
2.7
(9.8)
831.0
2022
Total
£m
750.8
(8.0)
742.8
2023
Total
%
57.8
57.6
2022
Total
%
56.6
56.7
1. Statutory gross margin is calculated as statutory gross profit dividend by sales.
2. LFL adjusted gross margin is calculated as LFL adjusted gross profit divided by LFL adjusted sales. Refer to the
tables above for a reconciliation of the nearest GAAP measure (sales/gross profit respectively) to LFL adjusted
sales/LFL adjusted gross profit.
d) LFL adjusted overheads
2023 LFL adjusted overheads
Statutory indirect production and engineering expenses
Statutory sales and marketing expenses
Statutory administrative expenses
Total overheads
Net transaction-related costs and fair value adjustments
Spectris Foundation Contribution
Configuration and customisation costs carried out by third parties on material SaaS projects
Amortisation of acquisition-related intangible assets
Constant exchange rate adjustment to 2022 exchange rates
Acquisitions
LFL adjusted overheads
2022 LFL adjusted overheads
Statutory indirect production and engineering expenses
Statutory sales and marketing expenses
Statutory administrative expenses
Total overheads
Net transaction-related costs and fair value adjustments
Depreciation of acquisition-related fair value adjustments to property, plant and equipment
Configuration and customisation costs carried out by third parties on material SaaS projects
Amortisation of acquisition-related intangible assets
Disposal of businesses
LFL adjusted overheads
2023 LFL adjusted overheads as a percentage of sales
LFL adjusted overheads as a percentage of sales1
2022 LFL adjusted overheads as a percentage of sales
LFL adjusted overheads as a percentage of sales1
187
2023
Total
£m
(126.9)
(249.6)
(273.0)
(649.5)
14.0
1.0
40.0
18.9
(0.8)
7.2
(569.2)
2022
Total
£m
(114.1)
(233.0)
(231.1)
(578.2)
8.3
0.2
21.7
19.6
7.3
(521.1)
2023
Total
%
39.5
2022
Total
%
39.8
1. LFL overheads as a percentage of sales is calculated as LFL adjusted overheads divided by LFL adjusted sales.
Refer to the tables above for a reconciliation of the nearest GAAP measure (sales/total overheads respectively) to
LFL adjusted sales/LFL adjusted overheads.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 188
Appendix – Alternative performance measures continued
e) Adjusted net finance costs
Statutory net finance credit/(costs)
Net (gain)/loss on retranslation of short-term inter-company loan
balances
Adjusted net finance credit/(costs)
f) Adjusted profit before taxation
Adjusted operating profit
Share of post-tax results of associates
Adjusted net finance credit/(costs)
Adjusted profit before taxation
g) Adjusted earnings per share from continuing operations
Statutory profit after tax from continuing operations
Adjusted for:
Net transaction-related costs and fair value adjustments
Spectris Foundation Contribution
Depreciation of acquisition-related fair value adjustments to property,
plant and equipment
Configuration and customisation costs carried out by third parties on
material SaaS projects
Amortisation of acquisition-related intangible assets
Fair value through profit and loss movements on debt investments
Loss/(profit) on disposal of businesses
Net (gain)/loss on retranslation of short-term inter-company loan
balances
Tax effect of the above and other non-recurring items
Adjusted earnings from continuing operations
Weighted average number of shares outstanding (millions)
Adjusted earnings per share from continuing operations (pence)
Note
6
6
Note
11
10
27
24
6
7
9
2023
£m
6.9
(5.7)
1.2
2023
£m
262.5
(0.1)
1.2
263.6
2023
£m
145.4
14.0
1.0
–
40.0
18.9
(2.8)
12.6
(5.7)
(16.5)
206.9
103.6
199.7
2022
£m
(17.3)
14.6
(2.7)
2022
£m
222.4
–
(2.7)
219.7
2022
£m
114.8
8.3
–
0.2
21.7
19.6
4.1
(0.3)
14.6
(11.0)
172.0
107.6
159.9
Basic earnings per share in accordance with IAS 33 ‘Earnings per share’ are disclosed in note 9.
Financial position measures
h) Net cash
Bank overdrafts
Total borrowings
Cash and cash equivalents included in current assets
Cash and cash equivalents included in assets held for sale
Net cash
Note
16
15
15, 24
2023
£m
–
–
138.5
0.3
138.8
2022
£m
(0.1)
(0.1)
228.1
–
228.0
Net cash excludes lease liabilities arising under IFRS 16 as this aligns with the definition of net
cash under the Group’s bank covenants.
Reconciliation of changes in cash and cash equivalents
to movements in net cash
Net (decrease)/increase in cash and cash equivalents
Proceeds from borrowings
Repayment of borrowings
Effect of foreign exchange rate changes
Movement in net cash
Net cash at beginning of year
Net cash at end of year
Cash flow measures
i) Adjusted cash flow
Cash generated from operations (from continuing and discontinued operations)
Net income taxes paid
Net cash inflow from operating activities
Transaction-related costs paid
Restructuring cash outflow
Net income taxes paid
Purchase of property, plant and equipment and intangible assets (from continuing
and discontinued operations)
SaaS-related cash expenditure
Proceeds from disposal of property, plant and equipment and software
Adjusted cash flow from discontinued operations
Adjusted cash flow from continuing operations
Adjusted cash flow conversion from continuing operations1
2023
£m
(85.7)
–
0.1
(3.6)
(89.2)
228.0
138.8
2023
£m
245.5
(50.3)
195.2
5.8
1.4
50.3
(24.7)
40.0
3.1
–
271.1
103%
2022
£m
50.4
(326.2)
326.8
9.2
60.2
167.8
228.0
2022
£m
166.8
(46.8)
120.0
6.5
7.6
46.8
(44.9)
21.7
13.4
(7.3)
163.8
74%
1. Adjusted cash flow conversion from continuing operations is calculated as adjusted cash flow as a proportion of
adjusted operating profit.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 189
l) Order intake, order book and book-to-bill
Order intake is defined as the monetary value of contractual commitments towards future
product fulfilment recorded within the financial period. The order book is defined as the
volume of outstanding contractual commitments for future product fulfilment measured at
period end. Book-to-bill is defined as the ratio of order intake to sales within the financial
period. These measures cannot be reconciled because they do not derive from the
Consolidated Financial Statements, and are presented because they are indicative of potential
future revenues.
m) Vitality index
Vitality index measures revenue recognised in the current year from products released over the
previous five years as a percentage of total revenue in the current year, as shown in the
Consolidated Income Statement.
Sales (see APM a)
Sales recognised in the current year from products released over the previous
five years
Vitality index
2023
£m
2022
£m
1,449.2
1,327.4
315.9
22%
337.2
25%
Appendix – Alternative performance measures continued
Other measures
j) ROGCE
The ROGCE is calculated as adjusted operating profit from continuing and discontinued
operations for the last 12 months divided by the average of opening and closing gross capital
employed. Gross capital employed is calculated as net assets excluding net cash and
excluding accumulated amortisation and impairment of acquisition-related intangible
assets including goodwill.
Net cash (see APM h)
Accumulated impairment losses on goodwill including items transferred to assets
held for sale (see note 10)
Accumulated amortisation and impairment of acquisition-related intangible assets
including items transferred to assets held for sale
Shareholders' equity
Gross capital employed
Average gross capital employed (current and prior year)1
2023
£m
2022
£m
(138.8)
(228.0)
40.6
76.2
149.9
1,315.9
1,367.6
1,419.2
185.7
1,436.9
1,470.8
1,473.4
Adjusted operating profit from continuing operations (see APM b)
262.5
222.4
Adjusted operating profit from discontinued operations (see note 24)
Total adjusted operating profit for last 12 months
ROGCE
–
262.5
14.0
236.4
18.5%
16.0%
1. Average gross capital employed is calculated as current year gross capital employed divided by comparative year
gross capital employed.
k) Net transaction-related costs and fair value adjustments
Net transaction-related costs and fair value adjustments comprise transaction costs of £6.5m
(2022: £7.3m) that have been recognised in the continuing Consolidated Income Statement
under IFRS 3 (Revised) ‘Business Combinations’ and other fair value adjustments relating to
deferred and contingent consideration comprising a charge of £7.5m (2022: charge of £1.0m).
Net transaction-related costs and fair value adjustments are included within administrative
expenses. Transaction-related costs have been excluded from the adjusted operating profit and
transaction costs paid of £5.8m (2022: £6.5m) have been excluded from the adjusted cash flow.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 190
Spectris plc Statement of Financial Position
As at 31 December 2023
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investments in subsidiary undertakings
Derivative financial instruments
Deferred tax assets
Retirement benefit assets
Current assets
Current tax assets
Other receivables (due after more than one year: £138.4m (2022:
£138.8m)
Derivative financial instruments
Cash and cash equivalents
Assets held for sale
Total assets
LIABILITIES
Current liabilities
Derivative financial instruments
Other payables
Net current liabilities
Note
2023
£m
2022
£m
4
5
6
11
7
5
9
–
0.3
1,134.6
0.4
5.2
2.4
1,142.9
0.1
0.9
1,128.9
0.6
3.6
–
1,134.1
16.9
13.8
194.1
5.9
59.4
–
276.3
1,419.2
196.6
3.6
117.9
1.7
333.6
1,467.7
(5.9)
(538.1)
(544.0)
(267.7)
(3.6)
(569.1)
(572.7)
(239.1)
Non-current liabilities
Derivative financial instruments
Other payables
Retirement benefit obligations
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Retained earnings
Merger reserve
Capital redemption reserve
Special reserve
Total equity
Note
2023
£m
2022
£m
9
11
10
10
10
10
(0.4)
(42.4)
–
(42.8)
(586.8)
832.4
5.3
231.4
557.3
3.1
1.2
34.1
832.4
(0.6)
(132.4)
(0.2)
(133.2)
(705.9)
761.8
5.5
231.4
486.7
3.1
1.0
34.1
761.8
The Company’s profit for the year was £295.5m (2022: profit £373.1m).
The Financial Statements on pages 190 to 202 were approved by the Board of Directors on
28 February 2024 and were signed on its behalf by:
Derek Harding
Chief Financial Officer
Company Registration No. 02025003
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
191
Spectris plc Statement of Changes in Equity
For the year ended 31 December 2023
At 1 January 2023
Profit for the year
Other comprehensive income:
Re-measurement of net defined benefit obligations, net of tax
Total comprehensive income for the year
Transactions with owners recorded directly in equity:
Own shares acquired for share buyback programme
Equity dividends paid
Capital contribution relating to share-based payments
Share-based payments, net of tax
Utilisation of treasury shares
At 31 December 2023
For the year ended 31 December 2022
At 1 January 2022
Profit for the year
Other comprehensive income:
Re-measurement of net defined benefit obligations, net of tax
Total comprehensive income for the year
Transactions with owners recorded directly in equity:
Own shares acquired for share buyback programme
Equity dividends paid
Capital contribution relating to share-based payments
Share-based payments, net of tax
Utilisation of treasury shares
At 31 December 2022
Note
Share capital
£m
Share premium
£m
Retained
earnings
£m
Merger reserve
£m
Capital
redemption
reserve
£m
Special reserve
£m
Total equity
£m
5.5
–
–
–
(0.2)
–
–
–
–
5.3
231.4
–
–
–
–
–
–
–
–
231.4
486.7
295.5
1.2
296.7
(160.8)
(79.7)
7.5
6.3
0.6
557.3
3.1
–
–
–
–
–
–
–
–
3.1
1.0
–
–
–
0.2
–
–
–
–
1.2
34.1
–
–
–
–
–
–
–
–
34.1
761.8
295.5
1.2
296.7
(160.8)
(79.7)
7.5
6.3
0.6
832.4
10
13
Note
Share capital
£m
Share premium
£m
Retained
earnings
£m
Merger reserve
£m
Capital
redemption
reserve
£m
Special reserve
£m
Total equity
£m
5.8
–
–
–
(0.3)
–
–
–
–
5.5
231.4
–
–
–
–
–
–
–
–
231.4
365.8
373.1
7.3
380.4
(191.0)
(78.6)
5.6
4.3
0.2
486.7
3.1
–
–
–
–
–
–
–
–
3.1
0.7
–
–
–
0.3
–
–
–
–
1.0
34.1
–
–
–
–
–
–
–
–
34.1
640.9
373.1
7.3
380.4
(191.0)
(78.6)
5.6
4.3
0.2
761.8
10
13
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 192
Notes to the Company Accounts
1. Basis of preparation and summary of significant accounting policies
The separate Financial Statements of the Company are presented as required by the Companies
Act 2006. As permitted by that Act, the separate Financial Statements have been prepared in
accordance with applicable accounting standards in the United Kingdom. In accordance with
the exemption provided by Section 408 of the Companies Act 2006, the Company has not
presented its own income statement or statement of comprehensive income.
a) Basis of preparation
These Financial Statements were prepared in accordance with Financial Reporting Standard
101 ‘Reduced Disclosure Framework’ (FRS 101). The Company’s shareholders were notified in
2015 of the use of the UK-adopted IFRS disclosure exemptions and there were no objections to
the adoption of FRS 101.
In preparing these Financial Statements, the Company applies the recognition, measurement
and disclosure requirements of International Financial Reporting Standards as adopted by the
UK (IFRS), but makes amendments where necessary in order to comply with the Companies
Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has
been taken.
The Company has applied the exemptions available under FRS 101 in respect of the following
disclosures:
As permitted by s408 of the Companies Act 2006 the Company has elected not to present its
own Income Statement or Statement of Comprehensive Income for the year. The profit
attributable to the Company is disclosed in the footnote to the Company’s Statement of
Financial Position.
The following accounting policies have been applied consistently in dealing with items which
are considered material in relation to the Financial Statements.
Significant accounting judgements and estimates
In determining and applying accounting policies, judgement is often required where the
choice of specific policy, assumption or accounting estimate to be followed could materially
affect the reported amounts of assets, liabilities, income and expenses, should it later be
determined that a different choice be more appropriate. Estimates and assumptions are
reviewed on an ongoing basis and are based on historical experience and various other factors
that are believed to be reasonable under the circumstances.
In the course of preparing these Financial Statements in accordance with the Company’s
accounting policies, no judgements that have a significant effect on the amounts recognised
in the Financial Statements have been made, other than those involving estimation.
Management consider the following to be areas of estimation for the Company due to greater
complexity and/or are particularly subject to uncertainty.
• A Cash Flow Statement and related notes;
• Comparative period reconciliations for share capital, property, plant and equipment and
intangible assets;
• Disclosures in respect of transactions with wholly owned subsidiaries.;
• Disclosures in respect of capital management;
• The effects of new but not yet effective IFRSs;
• Disclosures in respect of the compensation of key management personnel; and
• The requirement to present a statement of financial position at the beginning of the
preceding period when retrospectively applying an accounting policy.
As the Consolidated Financial Statements of Spectris plc (pages 136 to 185) include the
equivalent disclosures, the Company has also taken the exemptions under FRS 101 available in
respect of the following disclosures:
• IFRS 2 ‘Share-Based Payments’ in respect of Group-settled share-based payments; and
• Certain disclosures required by IFRS 13 ‘Fair Value Measurement’ and the disclosures required
by IFRS 7 ‘Financial Instrument Disclosures’.
The Financial Statements have been prepared on the historical cost basis, except for the
revaluation of financial instruments. Historical cost is generally based on the fair value of the
consideration given in exchange for the assets. The principal accounting policies are set
out below.
Key sources of estimation uncertainty
Retirement benefit plans
Accounting for retirement benefit plans under IAS 19 (revised) requires an assessment of the
future benefits payable in accordance with actuarial assumptions. The discount rate and rate of
retail price inflation (RPI) assumptions applied in the calculation of plan liabilities, which are set
out in note 19, represent a key source of estimation uncertainty for the Company. Details of the
accounting policies applied and the related sensitivities in respect of the UK scheme for the
Company retirement benefit plans are set out on page 167.
b) Summary of significant accounting policies
Intangible assets
Intangible assets purchased by the Company are capitalised at their cost.
Intangible assets with finite lives are amortised over the useful economic life and assessed for
impairment whenever there is an indication that the intangible asset may be impaired. The
estimated useful economic lives are as follows:
• Software – three to seven years
The cost of acquiring software (including associated implementation costs where applicable)
that is not specific to an item of property, plant and equipment is classified as an intangible
asset. The Company only capitalises costs relating to the configuration and customisation of
SaaS arrangements as intangible assets where control of the software exists.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 193
1. Basis of preparation and summary of significant accounting policies continued
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and
impairment losses. The cost comprises the purchase price paid and any costs directly
attributable to bringing it into working condition for its intended use.
Taxation
Tax on the profit or loss for the year comprises both current and deferred tax. Tax is recognised
in the Income Statement except to the extent that it relates to items recognised either in other
comprehensive income or directly in equity, in which case tax is recognised in the Statement of
Comprehensive Income or the Statement of Changes in Equity, respectively.
Depreciation is recognised in the Income Statement on a straight-line basis to write off the
cost, less the estimated residual value (which is reviewed annually), of property, plant and
equipment over its estimated useful economic life. Depreciation commences on the date the
assets are available for use within the business and the asset carrying values are reviewed for
impairment when there is an indication that they may be impaired. Land is not depreciated.
Estimated useful lives are as follows:
• Short leasehold property – over the period of the lease.
• Office equipment – 3 to 20 years.
Investments
Investments in subsidiaries are stated at historical cost, less provision for any impairment
in value.
Assets held for sale
Assets classified as held for sale are measured at the lower of carrying amount and fair value
less costs to sell.
Assets are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction rather than continuing use. This condition is regarded as met only
when the sale is highly probable, and the asset is available for immediate sale in its present
condition and when management is committed to the sale which is expected to qualify for
recognition as a completed sale within one year from the date of classification.
Trade and other receivables
Trade and other receivables are carried at original invoice amount (which is considered a
reasonable proxy for fair value) and are subsequently held at amortised cost less provision for
impairment. The provision for impairment of receivables is based on lifetime expected credit
losses. Lifetime expected credit losses are calculated by assessing historic credit loss
experience, adjusted for factors specific to the receivable and operating company.
Cash and cash equivalents
This comprises cash at bank and in hand and short-term deposits held on call or with
maturities of less than three months at inception.
Trade and other payables
Trade and other payables are recognised at the amounts expected to be paid to counterparties
and subsequently held at amortised cost.
Current tax is the expected tax payable on the taxable income for the year, using tax rates
enacted or substantively enacted at the Statement of Financial Position date, and any
adjustments to tax payable in respect of prior years. Tax positions are reviewed to assess
whether a provision should be made based on prevailing circumstances. Tax provisions are
included within current taxation liabilities.
Deferred taxation is provided on taxable temporary differences between the carrying amounts
of assets and liabilities in the Financial Statements and their corresponding tax bases. Deferred
tax is measured using the tax rates expected to apply when the asset is realised or the liability
settled based on tax rates enacted or substantively enacted at the Statement of Financial
Position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable
profits will be available against which the asset can be utilised or that they will reverse.
Deferred tax assets are reduced to the extent that it is no longer probable that the related tax
benefit will be realised.
Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity
and the same taxation authority.
Foreign currency translation
The functional currency of the Company is Pounds Sterling and is determined with reference
to the currency of the primary economic environment in which it operates. Transactions in
currencies other than the functional currency are initially recorded at the functional currency
rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the rate of exchange ruling at the Statement of Financial
Position date. Exchange gains and losses on settlement of foreign currency transactions are
translated at the rate prevailing at the date of the transactions, or the translation of monetary
assets and liabilities at period end exchange rates, and are charged/credited to the Income
Statement. Non-monetary assets and liabilities denominated in foreign currencies that are
stated at historical cost are translated to the functional currency at the foreign exchange rate
ruling at the date of the transaction.
Notes to the Company Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 194
1. Basis of preparation and summary of significant accounting policies continued
Financial instruments
Recognition
The Company recognises financial assets and liabilities on its Statement of Financial Position
when it becomes a party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amount is reported in the Statement of
Financial Position when there is a legally enforceable right to set off the recognised amounts
and there is an intention to settle on a net basis, or realise the asset and settle the liability
simultaneously.
Measurement
When financial assets and liabilities are initially recognised, they are measured at fair value,
being the consideration given or received plus directly attributable transaction costs.
Originated loans and receivables are initially recognised in accordance with the policy stated
above and subsequently re-measured at amortised cost using the effective interest method.
Allowance for impairment is estimated on a case-by-case basis.
The Company uses derivative financial instruments such as forward foreign exchange
contracts to hedge risks associated with foreign exchange fluctuations. These are designated
as cash flow hedges. At the inception of the hedge relationship, the Company documents the
relationship between the hedging instrument and the hedged item, along with its risk
management objectives and its strategy for undertaking various hedge transactions.
Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents
whether the hedging instrument that is used in a hedging relationship is highly effective in
offsetting changes in cash flows of the hedged item.
The effective portion of changes in the fair value of derivatives that are designated and qualify
as cash flow hedges are deferred in equity. The gain or loss relating to the ineffective portion is
recognised immediately in the Income Statement.
Amounts deferred in equity are reclassified to the Income Statement in the periods when the
hedged item is recognised in the Income Statement, in the same line of the Income Statement
as the recognised hedged item. However, when the forecast transaction that is hedged results
in the recognition of a non-financial asset or a non-financial liability, the gains and losses
previously deferred in equity are transferred from equity and included in the initial
measurement of the cost of the asset or liability.
When hedge accounting is discontinued any cumulative gain or loss deferred in equity at that
time remains in equity and is recognised when the forecast transaction is ultimately
recognised in the Income Statement. When a forecast transaction is no longer expected to
occur, the cumulative gain or loss that was deferred in equity is recognised immediately in the
Income Statement.
Derecognition
A financial asset is derecognised when the Company loses control over the contractual rights
to the cash flows from the asset. This occurs when the rights are realised, expire or are
surrendered. A financial liability is derecognised when the obligation specified in the contract is
discharged, cancelled or expires. Originated loans and receivables are derecognised on the
date they are transferred by the Company.
Impairment of financial assets
The Company assesses at each Statement of Financial Position reporting date whether there is
any objective evidence that a financial asset, or group of financial assets, is impaired. A financial
asset, or group of financial assets, is deemed to be impaired if, and only if, there is objective
evidence of impairment as a result of one or more events that have occurred after the initial
recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the
estimated future cash flows of the financial asset or group of financial assets that can be
reliably estimated.
Employee benefits
The Company operates a defined benefit post-retirement benefit plan and a defined
contribution pension plan.
Defined benefit plan
The Company’s net obligation recognised in the Statement of Financial Position in respect of
its defined benefit plan is calculated as the present value of the plan’s liabilities less the fair
value of the plan’s assets. The operating and financing costs of the defined benefit plan are
recognised separately in the Income Statement. Operating costs comprise the current service
cost, plan administrative expense, any gains or losses on settlement or curtailments, and past
service costs where benefits have vested. Finance items comprise the unwinding of the
discount on the net asset/deficit. Actuarial gains or losses comprising changes in plan liabilities
due to experience and changes in actuarial assumptions are recognised in other
comprehensive income.
The amount of any pension fund asset recognised in the Statement of Financial Position is
limited to any future refunds from the plan or the present value of reductions in future
contributions to the plan.
Defined contribution plan
A defined contribution plan is a post-employment benefit plan under which an entity pays
fixed contributions into a separate entity and will have no legal or constructive obligation to
pay further amounts. Obligations for contributions to defined contribution pension plans
are recognised in the Income Statement in the periods during which services are rendered
by employees.
Notes to the Company Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 195
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are
expensed as the related service is provided. A liability is recognised for the amount expected to
be paid under short-term cash bonus or profit-sharing plans if the Company has a present
legal or constructive obligation to pay this amount as a result of past service provided by the
employee, and the obligation can be estimated reliably.
Share-based payments
Certain employees of the Company receive part of their remuneration in the form of share-
based payment transactions, whereby employees render services in exchange for shares or
rights over shares (equity-settled transactions). The cost of equity-settled transactions with
employees is measured at fair value at the date at which they are granted. The fair value of
share awards with market-related vesting conditions is determined by an external consultant
and the fair value at the grant date is expensed on a straight-line basis over the vesting period
based on the Company’s estimate of shares that will eventually vest. The estimate of the
number of awards likely to vest is reviewed at each Statement of Financial Position reporting
date up to the vesting date, at which point the estimate is adjusted to reflect the actual
outcome of awards which have vested. No adjustment is made to the fair value after the
vesting date even if the awards are forfeited or not exercised.
Where it is not possible to incentivise managers of the Company with equity-settled options,
they are issued with cash-settled options. The charge for these awards is adjusted to reflect the
expected and actual levels of options that vest and the fair value is based on either the share
price at date of exercise or the share price at the Statement of Financial Position date if sooner.
Where the Company grants options over its own shares to the employees of its subsidiaries, it
recognises an increase in the cost of investment in its subsidiaries equivalent to the equity-
settled share based payment charge recognised in the subsidiary’s Financial Statements with
the corresponding credit being recognised directly in equity. In cases where a subsidiary is
recharged for the share-based payment expense, no such increase in investment is recognised
which may result in a credit in a particular year.
Dividends
Dividends are recognised as a liability in the period in which they are approved by shareholders.
Treasury shares
Shares held in treasury are treated as a deduction from equity until the shares are cancelled,
reissued or disposed. Where such shares are subsequently sold or reissued, any consideration
received, net of any directly attributable incremental costs and related tax effects, is included in
equity attributable to the Company’s equity shareholders.
2. Auditor’s remuneration
The details regarding the remuneration of the Company’s auditor are included in note 4 to the
Group Consolidated Financial Statements under ‘Fees payable to the Company’s auditor for
audit of the Company’s annual accounts.
3. Employee costs and other information
Average number of employees on a full-time equivalent basis:
Administrative
Employee costs, including Directors’ remuneration, are as follows:
Wages and salaries
Social security costs
Defined contribution pension plans
Equity-settled share-based payment expense
Cash-settled share-based payment expense
2023
Number
2022
Number
66
67
2023
£m
13.7
4.0
0.7
5.2
0.1
23.7
2022
£m
11.6
2.6
0.7
4.4
0.1
19.4
Directors’ remuneration
Further details of Directors’ remuneration and share options are given in note 5 to the Group
Consolidated Financial Statements and in the Directors’ Remuneration Report on pages 102
to 123.
Tax losses
As at 31 December 2023, the Company had capital tax losses of £16.1m (2022: £16.4m). No
provision has been made for deferred tax on the basis that there is insufficient evidence that
suitable taxable profits will arise in the future against which the losses may be offset and the
asset recovered.
Notes to the Company Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 196
4. Intangible assets
Cost
At 1 January 2023
Disposals
At 31 December 2023
Accumulated amortisation and impairment
At 1 January 2023
Reclassification
Disposals
At 31 December 2023
Carrying amount
At 31 December 2023
At 31 December 2022
5. Property, plant and equipment (PPE)
Cost
At 1 January 2023
Disposals
At 31 December 2023
Accumulated depreciation and impairment
At 1 January 2023
Reclassification
Charge for the year
Disposals
At 31 December 2023
Carrying amount
At 31 December 2023
At 31 December 2022
6. Investments in subsidiary undertakings
Cost and carrying amount
At 1 January 2023
Movements relating to share options granted to subsidiary employees
At 31 December 2023
Details of the Company’s subsidiaries are given in note 14.
7. Other receivables
Current
Amounts owed by Group undertakings
Loans owed by Group undertakings
Prepayments
Other receivables
Non-current
Loans owed by Group undertakings
Prepayments
Investment in
subsidiary
undertakings
£m
1,128.9
5.7
1,134.6
2023
£m
2.4
44.9
4.8
3.6
55.7
2023
£m
138.1
0.3
138.4
2022
£m
9.0
44.6
3.5
0.7
57.8
2022
£m
138.0
0.8
138.8
Total other receivables
194.1
196.6
All loans owed by Group undertakings are in relation to interest bearing intra-group loans which
are formalised arrangements on an arm’s length basis. Interest is charged at market reference
rate plus 2%. The structure and terms of these intra-group loans are unchanged from 2022. Other
amounts owed by Group undertakings are non-interest bearing and repayable on demand.
Software
£m
4.6
(2.7)
1.9
4.5
0.1
(2.7)
1.9
–
0.1
Total
£m
2.2
(1.1)
1.1
1.3
0.1
0.5
(1.1)
0.8
0.3
0.9
Leasehold
Improvements
£m
Right-of-Use
PPE
£m
Office
equipment
£m
0.4
–
0.4
0.1
–
0.2
–
0.3
0.1
0.3
0.3
–
0.3
0.1
–
0.1
–
0.2
0.1
0.2
1.5
(1.1)
0.4
1.1
0.1
0.2
(1.1)
0.3
0.1
0.4
During 2023 the Company disposed of its former headquarters building in Egham, Surrey, UK
for a profit of £0.5m.
At 31 December 2022 this was classified as held for sale but it did not meet the definition of
discontinued operations given in IFRS 5.
Notes to the Company Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 8. Borrowings
Current
Interest
rate
Repayable
date
2023
£m
2022
£m
10. Share capital and reserves
Bank overdrafts
Bank loans unsecured – £45.0m (2022: £45.0m)
uncommitted facility
Total current borrowings
determined on
drawdown
on demand
on demand
–
–
–
Further details of borrowings are provided in note 16 to the Group Consolidated Financial
Statements.
9. Other payables
Current
Amounts owed to Group undertakings
Loans owed to Group undertakings
Share buyback accrual
Accruals
Non-current
Loans owed to Group undertakings
2023
£m
15.6
460.3
45.9
16.3
538.1
2023
£m
42.4
–
–
–
2022
£m
7.3
547.4
–
14.4
569.1
2022
£m
132.4
All loans owed to Group undertakings are in relation to interest bearing intra-group loans which
are formalised arrangements on an arm’s length basis. Interest is charged at market reference
rate minus 0.25%. The structure and terms of these intra-group loans are unchanged from
2022. Other amounts owed to Group undertakings are non-interest bearing and repayable
on demand.
See note 10 for further details on the Company’s share buyback accrual.
197
Number of
shares
millions
105.8
2023
£m
5.3
Number of
shares
millions
109.1
2022
£m
5.5
Issued and fully paid (ordinary shares of 5p each):
At 1 January and 31 December
During the year ended 31 December 2023, 3,382,896 ordinary shares were repurchased and
cancelled by the Company, in the final tranches of the £300m share buyback programme
announced on 19 April 2022 and part of the first tranche of the £150m share buyback
announced on 11 December 2023. This resulted in a cash outflow of £114.9m, including
transaction fees of £1.2m. The Statement of Financial Position also includes an accrual of
£45.9m for share buyback accrual as at 31 December 2023.
During the year ended 31 December 2022, 6,439,493 ordinary shares were repurchased and
cancelled by the Company as part of the £300m share buyback programme announced on
19 April 2022, resulting in a cash outflow of £191.0m, including transaction fees of £1.2m.
No ordinary shares were issued upon exercise under share option schemes during the year
(2022: nil).
At 31 December 2023, the Company held 4,128,036 treasury shares (2022: 4,596,698). During
the year, 468,662 of these shares were issued to satisfy options exercised by, and SIP Matching
shares awarded to, employees which were granted under the Company’s share schemes
(2022: 170,408).
The Company has an employee benefit trust (EBT), which operates the Spectris Share Incentive
Plan (SIP) to all eligible UK-based employees. The EBT holds shares in Spectris plc for the
purposes of the SIP, further details of which are disclosed in the Directors’ Remuneration
Report. At 31 December 2023, the EBT held 51,807 shares which were purchased from the
market during the year (31 December 2022: 55,570). The costs of funding and administering the
plan are charged to the Income Statement in the period to which they relate.
Distributable reserves at 31 December 2023 are £512.9m (2022: £452.0m).
Other reserves
Movements in reserves are set out in the Statement of Changes in Equity. The retained
earnings reserve also includes own shares purchased by the Company and treated as treasury
shares. The nature and purpose of other reserves forming part of equity are as follows:
Merger reserve
This reserve arose on the acquisition of Servomex Limited in 1999, a purchase satisfied
substantially by the issue of share capital and therefore eligible for merger relief under the
provisions of Section 612 of the Companies Act 2006.
Capital redemption reserve
This reserve records the repurchase of the Company’s own shares.
During the year, as a result of the share buyback programme, the capital redemption reserve
increased by £0.2m (2022: £0.3m), reflecting the nominal value of the cancelled ordinary shares.
Special reserve
The special reserve was created historically following the cancellation of an amount of share
premium for the purpose of writing off goodwill. The special reserve is not distributable.
Notes to the Company Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
198
11. Retirement benefit plan
The Company participates in, and is the sponsoring employer of the UK Group defined benefit
plan. The plan provides pensions in retirement, death in service and in some cases disability
benefit to members. The pension benefit is linked to members’ final salary at retirement and
their service life. Since 31 December 2009, the UK plan has been closed to new members.
In accordance with IAS 19 (Revised 2011), there were £1.2m of Company contributions made to
the defined benefit plan during the year (2022: £1.2m).
Further details of the Spectris Pension Plan (UK) including all disclosures required under
FRS 101 are contained in note 19 to the Group Consolidated Financial Statements.
12. Contingent liabilities
The cross-guarantee arrangements to support trade finance facilities are included in note 28
of the Group Consolidated Financial Statements.
Where the Company enters into financial guarantee contracts to guarantee the indebtedness
of other companies within its group the Company considers these to be insurance
arrangements in accordance with the requirements of IFRS 4 and accounts for them as such.
In this respect, the Company treats the guarantee contract as a contingent liability until such
time as it becomes probable that the Company will be required to make a payment under the
guarantee.
In the normal course of business, the Company has provided bonds and guarantees through
local banking arrangements amounting to £22.7m (2022: £20.4m).
13. Dividends
Amounts recognised and paid as distributions to owners of the Company in the year
Interim dividend for the year ended 31 December 2023 of 25.3p (2022: 24.1p)
per share
Final dividend for the year ended 31 December 2022 of 51.3p (2022: 48.8p) per share
Amounts arising in respect of the year
Interim dividend for the year ended 31 December 2023 of 25.3p (2022: 24.1p)
per share
Proposed final dividend for the year ended 31 December 2023 of 53.9p (2022: 51.3p)
per share
2023
£m
26.0
53.7
79.7
2023
£m
26.0
54.8
80.8
2022
£m
25.3
53.3
78.6
2022
£m
25.3
53.6
78.9
The proposed final 2023 dividend is subject to approval by shareholders at the AGM on 23 May
2024 and has not been included as a liability in these Financial Statements.
Notes to the Company Accounts continuedSPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Notes to the Company Accounts continued
14. Related undertakings
In accordance with Section 409 of the Companies Act 2006, detailed below is a full list of related undertakings as at 31 December 2023.
All entities listed below have their registered office in their country of incorporation.
Subsidiaries
All wholly owned subsidiaries listed below are owned through intermediate holding companies, unless otherwise indicated.
Shareholdings are held in the class of ordinary shares, unless otherwise indicated.
Name
Blueberryje d.o.o.
Bruel & Kjaer UK Limited1
Bruel & Kjaer VTS Limited3
Burnfield Limited
Registered address
12, Gabrsko (dvanajst), Trbovlje, 1420, Slovenia
Jarman Way, Royston, Hertfordshire, SG8 5BQ
Jarman Way, Royston, Hertfordshire, SG8 5BQ
Melbourne House, 5th Floor, 44-46 Aldwych, London, WC2B 4LL, England
Concurrent High Performance Solutions Europe S.A.
Immeuble Uranus Parc Ariane, Rue Hélène Boucher, 78280 Guyancourt
Concurrent Nippon Kabushiki Kaisha
Yanagibashi First Bldg, 4F 19-6, 2-chome, Taito-ku, Tokyo 111-0052
Concurrent Real-Time Asia, Inc.
Concurrent Real-Time, Inc.
Creoptix AG
Cogency Global Inc, 850 New Burton Road, Suite 201, Dover, DE, 19904, United States
Cogency Global Inc, 850 New Burton Road, Suite 201, Dover, DE, 19904, United States
Zugerstrasse 76, 8820 Wädenswil
DISCOM Elektronische Systeme und Komponenten GmbH
Maschmühlenweg 81, Gottingen, 37081
DYTRAN Instruments, Inc
HBK FiberSensing SA
21592 Marilla Street, Chatsworth, CA 91311
Rua Vasconcelos Costa 277, Moreira, Maia
Hottinger Bruel & Kjaer Solutions LLC
100 Research Boulevard, Starkville, Mississippi, 39759
HBM Prenscia s.p. z.o.o.
Hottinger Bruel & Kjaer Inc.
Hottinger Brüel & Kjær A/S
Aleje Jerozolimskie 181 A, 02-222 Warsaw
19 Bartlett Street, Marlborough, Massachusetts 01752
Teknikerbyen 28, 2830 Virum
Hottinger Bruel & Kjaer Austria GmbH
Lemboeckgasse 63/2, A-1230, Wien, Vienna
Hottinger Bruel & Kjaer Benelux B.V.
Schutweg 15a, Waalwijk, 5145 NP
Hottinger Bruel & Kjaer Co., Ltd
106 Henshan Road, Suzhou New District, Suzhou, Jiangsu Province, 215009
Hottinger Bruel & Kjaer France SAS
2 Rue Benjamin Franklin, 94370 Sucy-en-Brie, France
Hottinger Brüel & Kjær GmbH
Im Tiefen See 45, Darmstadt, D-64293
Hottinger Brüel & Kjaer Ibérica, S.L.U.
Calle Teide número 5, San Sebastián de los Reyes, Madrid
Hottinger Bruel & Kjaer Italy SRL
Milano (MI), Via Pordenone 8, Milan 20132
Hottinger Bruel & Kjær Norway AS
Rosenholmveien 25, Trollasen, 1414
Hottinger Bruel & Kjaer Poland Sp z.o.o.
Aleje Jerozolimskie 181 A, 02-222 Warsaw
199
Country of incorporation
Slovenia
England & Wales
England & Wales
England & Wales
France
Japan
USA
USA
Switzerland
Germany
USA
Portugal
USA
Poland
USA
Denmark
Austria
Netherlands
China
France
Germany
Spain
Italy
Norway
Poland
Hottinger Bruel & Kjaer UK Limited
Technology Centre, Advanced Manufacturing Park, Brunel Way, Catcliffe, Rotherham, South Yorkshire, S60 5WG
England & Wales
IMTEC GmbH
Am Rosengarten 1, 14621 Schönwalde-Glien OT Wansdorf
International Applied Reliability Symposium LLC2
5210 E Williams Cir, 2nd Floor, Suite 240, Tucson Arizona 85711
Malvern Panalytical B.V.
Malvern Panalytical GmbH
Lelyweg 1, 7602EA, Almelo
Nürnbergerstr 113, D 34123 Kassel
Germany
USA
Netherlands
Germany
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 200200
Notes to the Company Accounts continued
Name
Malvern Panalytical Inc
Malvern Panalytical Limited
Malvern Panalytical Nordic AB
Malvern Panalytical S.A.S.
Malvern Panalytical srl
Registered address
2400 Computer Drive, Suite 201, Westborough Massachusetts 01581-1042
Enigma Business Park, Grovewood Road, Malvern, Worcestershire, WR14 1XZ
Vallongatan 1, 752 28 Uppsala
24 Rue Émile Baudot, Bâtiment le Phénix 91120 Palaiseau
Via G. Oberdan, 36, Lissone, 20851
Malvern Panalytical (Pty) Limited
Unit 4, Bush Hill Office Park, Jan Frederick Avenue, Randpark Ridge, 2169
Malvern-Aimil Instruments Pvt Limited
Naimex House, A-8, Mohan Co-operative Industrial Estate, Mathura Road, New Delhi – 110044
Nanosight Limited
Novisim Limited
PANalytical Limited1
Enigma Business Park, Grovewood Road, Malvern, Worcestershire, WR14 1XZ
Jarman Way, Royston, Hertfordshire, SG8 5BQ
Enigma Business Park, Grovewood Road, Malvern, Worcestershire, WR14 1XZ
Particle Measuring Systems AG
Reinluftweg 1, Zurich, CH-9630
Particle Measuring Systems Germany GmbH
Im Tiefen See 45, Darmstadt, D-64293
Particle Measuring Systems S.R.L.
Particle Measuring Systems, Inc.
Via di Grotte Portella, Frascati, Rome, 34-00044
5475 Airport Boulevard, Boulder, Colorado 80301
Particles Measuring Systems U.K. Limited
Compass House Vision Park, Chivers Way Histon, Cambridge, CB24 9AD
Particle Measuring Systems Ireland Limited
Unit 1c Three Rock Road, Sandyford Industrial Estate, Sandyford Dublin 18, Sandyford, Dublin, D18PR84, Ireland
Particle Measuring Technique Limited
Unit 1c Three Rock Road, Sandyford Industrial Estate, Sandyford Dublin 18, Sandyford, Dublin, D18PR84, Ireland
RealTime Acquisition Co.
RealTime Holdco, LLC2
Red Lion Controls B.V.
Red Lion Controls, Inc. 5
Red Lion Europe GmbH 5
Cogency Global Inc, 850 New Burton Road, Suite 201, Dover, DE, 19904, United States
Cogency Global Inc, 850 New Burton Road, Suite 201, Dover, DE, 19904, United States
De Nieuwe Erven 3, Unit 10200, 5431NL, Cujik
1750 Fifth Avenue, York, PA 17403
Geschäftsanschrift, Winnettener Str. 6, Dinkelsbühl, 91550
ReliaSoft India Private Limited
5th Floor, Arihant Nitco Park, 90, Dr.Radhakrishnan Salai, Mylapore Chennai – 600 004 India
RightHook Inc
Servomex B.V.
Servomex Company
Servomex GmbH
Servomex Group Limited
Servomex Middle East L.L.C.2
Servomex S.A.
Spectris Australia Pty Ltd
Spectris Canada Inc.
Spectris China Limited
Spectris Co., Ltd.
45 Jackson Street, San Jose, CA 95112-5102
Lelyweg 1, 7602EA, Almelo
12300 Dairy Ashford Road #400, Sugar Land, Texas 77478
Im Tiefen See 45, Darmstadt, D-64293
Jarvis Brook, Crowborough, East Sussex, TN6 3FB
Office No. 113, Business Park 01, Abu Dhabi International Airport, PO Box 147939
23 Rue de Roule, Paris, 75001
C/- Intertrust Australia PTY Ltd, Suite 2, Level 25, 100 Miller Street, North Sydney, NSW 2060
4915 Place Olivia, St-Laurent, Quebec, H4R 2V6
Unit A, 22/F, Wing Cheong Comm. Bldg., 23 Jervois Street, Sheung Wan, Hong Kong
Kawasaki Nisshincho Building, 7-1 Nisshincho, Kawasaki-ku, Kawasaki-shi, Kanagawa 210-0024, Japan
Country of incorporation
USA
England & Wales
Sweden
France
Italy
South Africa
India
England & Wales
England & Wales
England & Wales
Switzerland
Germany
Italy
USA
England & Wales
Ireland
Ireland
USA
USA
Netherlands
USA
Germany
India
USA
Netherlands
USA
Germany
England & Wales
United Arab Emirates
France
Australia
Canada
Hong Kong
Japan
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Notes to the Company Accounts continued
Name
Spectris Denmark ApS
Registered address
Teknikerbyen 28, 2830 Virum
Spectris Do Brasil Instrumentos Eletronicos Ltda.
Rua Luis Correia de Melo, 92 – Conj. 251-252, Vila Cruzeiro, CEP 04726-220, Sao Paulo SP
Spectris Funding B.V.
Spectris Germany GmbH
Lelyweg 1, 7602EA, Almelo
Im Tiefen See 45, Darmstadt, D-64293
Spectris Group Holdings Limited1, 4
Melbourne House, 5th Floor, 44-46 Aldwych, London, WC2B 4LL, England
Spectris Holdings Inc.
Spectris Inc.
2400 Computer Drive, Suite 201, Westborough Massachusetts 01581
2400 Computer Drive, Suite 201, Westborough Massachusetts 01581
Spectris Instrumentation and Systems Shanghai Ltd.
Bldg 9,No. 88, Lane 2888, HuaNing Road, MingHang District, Shanghai, 201108
201
Country of incorporation
Denmark
Brazil
Netherlands
Germany
England & Wales
USA
USA
China
Spectris Korea Ltd.
7F, N Tower Garden Bldg., 26, HwangSaeWool-ro 200beon-gil, Bundang-gu, Seongnam-si, Kyunggi-do, 13595, Korea.
Korea, Republic of
Spectris Mexico, S. De R.L. De C.V.
Av. Pedro Ramirez Vazquez No. 200–13, Nivel 1, Col. Valle Oriente, San Pedro Garza Garcia, C.P. 66269
Spectris Netherlands B.V.
Spectris Netherlands Cooperatief W.A.1, 2
Lelyweg 1, 7602 EA Almelo
Lelyweg 1, 7602 EA Almelo
Spectris Pension Trustees Limited1
Melbourne House, 5th Floor, 44-46 Aldwych, London, WC2B 4LL, England
Spectris Pte Ltd
Spectris Taiwan Limited
31 Kaki Bukit Road 3, Techlink #04-05/07, 417818
4F., No. 417, Ruiguang Rd., Neihu Dist., Taipei City 114690, Taiwan
Spectris Technologies Private Limited
A-1/367, 2nd Floor, Janakpuri A-3, New Delhi-110058, India
Spectris UK Holdings Limited3
Spectris US Holdings Limited
System Level Simulation Inc.
VI-grade GmbH
VI-grade Japan Ltd.
VI-grade Limited
VI-grade s.r.l.
Melbourne House, 5th Floor, 44-46 Aldwych, London, WC2B 4LL, England
Melbourne House, 5th Floor, 44-46 Aldwych, London, WC2B 4LL, England
75 East Santa Clara St., Suite 900, San Jose, CA 95113
Im Tiefen See 45, Darmstadt, D-64293
6-26-5, Kameido, Koto-ku Tokyo 136-0071, Japan
Melbourne House, 5th Floor, 44-46 Aldwych, London, WC2B 4LL, England
Via Galileo Galilei 42, 33010 Tavagnacco (Udine)
Viscotek Europe Limited
Melbourne House, 5th Floor, 44-46 Aldwych, London, WC2B 4LL, England
Mexico
Netherlands
Netherlands
England & Wales
Singapore
Taiwan
India
England & Wales
England & Wales
United States
Germany
Japan
England & Wales
Italy
England & Wales
Zhuhai Omec Instruments Co., Ltd
2F, No.3 Factory, No.33 Keji San Road, Tangjiawan Town, Gaoxin District, Zhuhai City, Guangdong Province, China
China
1. Wholly owned by Spectris plc.
2. All LLC, Cooperatief and other non-equity owned entities listed are wholly owned and controlled by Spectris plc directly or indirectly through intermediate holding companies.
3. Share capital consists of ordinary shares and deferred shares.
4. Share capital consists of ordinary shares and redeemable shares.
5. An announcement was released to the market via the Regulatory News Service on 11 December 2023 that this entity will be sold in the first half of 2024.
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 202202
Notes to the Company Accounts continued
14. Related undertakings continued
UK registered subsidiaries exempt from audit
UK incorporated subsidiaries which have taken exemption from audit per Section 479A of the
Companies Act 2006 for the year ended 31 December 2023 are listed below.
Spectris plc will guarantee the debts and liabilities of the companies claiming the statutory
audit exemption at the balance sheet date of £23 million in accordance with Section 479C of
the Companies Act 2006. The Company has assessed the probability of loss under the
guarantee as remote.
Name
Bruel & Kjaer VTS Limited
Bruel & Kjaer UK Limited
Burnfield Limited
Hottinger Bruel & Kjaer UK Limited
Novisim Limited
Spectris UK Holdings Limited
Spectris US Holdings Limited
VI-grade Limited
Particle Measuring Systems U.K. Limited
Registered number
01539186
04066051
01522736
01589921
05269664
04451903
04451883
08245242
07786895
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 203
Shareholding in
Spectris shares
Percentage of
issued share
capital
8,285,165
7,472,905
6,593,445
5,143,245
5,041,831
3,832,503
3,326,286
3,199,101
3,110,059
2,540,132
8.15%
7.35%
6.49%
5.06%
4.96%
3.77%
3.27%
3.15%
3.06%
2.50%
Additional Information
Shareholder Information
Financial calendar
Q1 trading update
Ex-dividend date for 2023 final dividend
Record date for 2023 final dividend
Annual General Meeting
Major shareholders as at 31 December 2023
2 May 2024
16 May 2024
Fidelity Management & Research
17 May 2024
BlackRock
23 May 2024
UBS Asset Management
Record date for participation in the Dividend Reinvestment Plan for the 2023 final dividend 7 June 2024
Wellington Management
28 June 2024
Vanguard Group
30 July 2024
Sprucegrove Investment Management
Liontrust Asset Management
Artemis Investment Management
Royal London Asset Management
Legal & General Investment Management
2023 final dividend payable
2024 half-year results
Company Secretary
Rebecca Dunn
Email: cosec@spectris.com
Registered office
Spectris plc
Melbourne House
5th floor
44–46 Aldwych
London
WC2B 4LL
Tel: +44 20 4566 9400
Email: info@spectris.com
Company registered in England, No. 2025003
Auditor
Deloitte LLP
Banker
National Westminster Bank plc
Solicitor
Slaughter and May
Brokers
Barclays Bank plc
BofA Securities
Financial PR adviser
Teneo
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Email news service
To receive details of press releases and other announcements as they are issued, register with
the mail alert service on the Company’s website at www.spectris.com.
Cautionary statement
This Annual Report may contain forward-looking statements. These statements can be
identified by the fact that they do not relate only to historical or current facts. Without
limitation, forward-looking statements often use words such as anticipate, target, expect,
estimate, intend, plan, goal, believe, will, may, should, would, could or other words of similar
meaning. These statements may (without limitation) relate to the Company’s financial position,
business strategy, plans for future operations or market trends. No assurance can be given that
any particular expectation will be met or proved accurate and shareholders are cautioned not
to place undue reliance on such statements because, by their very nature, they may be
affected by a number of known and unknown risks, uncertainties and other important factors
which could cause actual results to differ materially from those currently anticipated. Any
forward-looking statement is made on the basis of information available to Spectris plc as of
the date of the preparation of this Annual Report. All forward-looking statements contained in
this Annual Report are qualified by the cautionary statements contained in this section. Other
than in accordance with its legal and regulatory obligations, Spectris plc disclaims any
obligation to update or revise any forward-looking statement contained in this Annual Report
to reflect any change in circumstances or its expectations.
The registrars provide a range of shareholder
services online at www.shareview.co.uk
Share price information
The Company’s ordinary shares are listed on
the London Stock Exchange. The latest share
price is available via the Company’s website at
www.spectris.com
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 204
SPECTRIS PLC ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS This document is printed on paper
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Design and production
Spectris plc
Melbourne House
5th floor
44–46 Aldwych
London
WC2B 4LL
www.spectris.com