Spectris Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2025

Key Takeaways

  • Positive Sentiment: Reported revenue rose 8% in H1 (20% in Q2) and order intake grew 5% in H1 (15% in Q2) with a book-to-bill over one, driving adjusted operating profit up 3% to £65.6 m, cash conversion of 126%, and an interim dividend increase of 5% to £0.28 per share.
  • Positive Sentiment: The profit improvement programme is on track to exceed its £30 m savings target this year, delivering over £10 m in H1 and expecting more than £20 m in H2, with early ERP and acquisition synergies already realized.
  • Neutral Sentiment: Momentum in key end markets is building—Q2 like-for-like sales grew 9%, led by materials, academia and life sciences, and pharma returned to growth—although automotive, cleantech and aerospace remain soft amid tariff and macro uncertainty.
  • Positive Sentiment: Net debt stood at £546 m (2.3× leverage) with strong working capital management, and management expects further cash generation to reduce leverage toward the 1–2× target by year-end.
AI Generated. May Contain Errors.
Earnings Conference Call
Spectris Q2 2025
00:00 / 00:00

There are 6 speakers on the call.

Speaker 1

Reported revenue was 8% higher in the first half, including 20% growth in the second quarter, recovering the dip that we saw in Q1. While we did have a softer year-on-year comparison in Q2, nonetheless, after a prolonged and largely unprecedented downturn, we are now seeing building momentum in our end-market-driven demand. Reported order intake was 5% higher in the first half, including 15% growth in the second quarter, with the book-to-bill ratio of just over 1. That led to a jump in operating profit of £65.6 million, which was up 3% on the reported basis. Cash generation and returning revenue. We delivered a very strong cash performance in the first half, with cash conversion of 126%. We've declared an interim dividend of £0.28 per share, which represents 5% growth on the 2024 interim dividend.

Speaker 1

Our profit improvement program remains firmly on track to deliver at least £30 million of savings this year. Over £10 million was delivered in the first half, with more than £20 million expected to be realized in the second half. Cost synergy is already starting to come through. We are seeing the benefits of the new ERP system in modern management and HVK, and headcount has been right-sized for current demand level. Turning to last year's acquisitions, I'm delighted with the integration progress that has been made in the first half in MicroMaritima and SIAP. We have made great progress in successfully integrating MicroMaritima and SIAP, including implementing a new organizational structure and reworked sales model. SIAP is our new center of excellence for handheld instruments, which incorporates MicroMaritima's existing handheld business.

Speaker 1

We are already seeing the benefits of collaboration between these two businesses, both in terms of accelerated sales and new products. In Dynamics, again, PA Midcrest has been integrating into Spectris Dynamics. PA Midcrest and SIAP and our team are already working on developing a new groundbreaking high-temperature accelerometer for demanding applications. There are also more new products in the pipeline. Through the integration process, it has become increasingly clear that synergy opportunities are greater than those that we outlined in the acquisition business case. That is greater scope for cross energies, which is a key driver for our upgraded cost savings target. Early discussions with customers have given us confidence in respect to growing potential revenue synergies as well. Finally, I just want to provide a summary of where we are regarding this plan to take over, obviously.

Speaker 1

As we know, on the 23rd of June, 2025, the board and the house today have reached agreement on the terms for recommended cash acquisitions by Advent International for the entire issued and to be issued share capital of Spectris plc for an offer value of £37.62 per Spectris share, comprising £37.35 in cash and an interim dividend of £0.28 per Spectris share. That has been implemented by way of the court thanks to the scheme of arrangement under Part 26 of the Companies Act. Subsequently, we recommended an offer of a 10-year of £40 to deliver on the 2nd of July, followed by an improved offer from Advent International last Friday at £41. The board then switched its recommendation again on the 5th of August, following an offer of £41.75 per Spectris share from KKR, which again includes an interim dividend of £0.28 per share.

Speaker 1

It represents a 104.9% premium to the undisturbed share price on the 6th of June, equating to a 20.3 times 2024 adjusted EBITDA for the Spectris group. In terms of the timeline from here, pending the acceptance of the offer from the shareholders, completion is currently estimated in or by the first quarter of 2026, whether the main approval has been granted. The next slide provides some more color on what we are seeing in our end market and also the design of the recovery that I would love here. One of the key indicators we look at internally is the momentum in our quarterly growth rate compared to that in our annual growth rate. When quarterly growth crosses above the annual growth line, it is often a good predictor of recovery.

Speaker 1

As you can see in the chart on the left-hand side, both orders and values, the indicators suggest we have been in the early stages of recovery for the past 12 months. Orders have been in accelerating growth territory for the past 8 to 10 months on the lifeline and the quarterly basis, and also moving to positive growth from quarter to quarter. Certainly, the macroeconomic environment is still challenging. It seems to expect the cruel news to gain a direct impact of tariffs. At the same time, also be mindful of the significant uncertainties still remaining. It's too early to call a sustained recovery, but this does provide us with a degree of confidence as we head into the second half of the year.

Speaker 1

Orders at the end of the first half were up on the prior year, except for automotive, clean tech, and aerospace spends, which had a very tough comparison. Automotive was down double digits, but larger CapEx and R&D projects are being delayed by customers due to the ongoing tariff and macro uncertainty. The table on the right-hand side shows the like-for-like sales performance by end market for both the first half and the second quarter. The first thing to note is the significant improvement in sales growth in the second quarter at the group level. Now, having been down 8% in the first quarter, on a like-for-like basis, we grew by 9% in the second quarter. Part of this is clearly due to the softer year-on-year comparison we had in Spectris Scientific.

Speaker 1

We are seeing improving momentum in a number of our end markets, where we saw a notable increase in sales growth in Q2. Materials, academia, and life sciences delivered the strongest growth. It was also clear to see pharma getting back to growth by the end of the period. One quarter doesn't make a trend, and we're not getting carried away, but it's pleasing to see the improving momentum is broad-based across most of our end markets. With that, I'll hand over to Angela to take you through the financials.

Operator

Thank you, Andrew, and good morning, everyone. I'm delighted to be here this morning to run through our H1 financial results. Let's jump straight into the numbers. I'll start with some of the key highlights for the first half of 2025. Orders were 2% lower on a like-for-like basis. As you heard from Andrew, we saw improved momentum throughout the period, such that our like-for-like order intake in the second quarter was up by 4%. Our book-to-bill ratio was just over one times in the period. In the quarter, sales grew 9% like-for-like, albeit helped by an easier comparator in Spectris Scientific. Of course, our reported numbers were even stronger due to the acquisitions made in 2024. Profit largely followed the sales performance with flat growth on a like-for-like basis, equating to an adjusted operating margin of 10.3%.

Operator

Moving on to cash, I'm very pleased with the first half cash performance of the group. Adjusted cash flow was a very strong £82.4 million, resulting in cash conversion of 126%, which is the highest in many years outside of COVID. This was driven by a strong working capital performance in the period, mainly from the reduction in customer debt and improved management of creditors. There is scope for further working capital improvement, certainly in the second half. Our return on gross capital employed fell to 12.2% as a result of the increase in debt associated with the acquisitions. Net debt overall stands at £546 million, with a leverage of 2.3 times on a covenant basis, both broadly unchanged from the end of 2024.

Operator

Given the typical seasonality of our cash flow, this is a very strong cash performance, and I would expect material reductions in net debt and leverage in the second half. The next table provides a bridge between adjusted and statutory operating profit, as well as profit before tax. Costs associated with our profit improvement program totaled £12 million. I am pleased to confirm that the program is moving at pace and is in line with plan. My expectation is that we should exceed our original savings target of £30 million by the end of the financial year. A credit of £16.8 million includes an £18.1 million fair value adjustment, which relates to the release of deferred consideration partially offset by related fees. Public offer related costs, which refers to takeover costs incurred by Spectris thus far, was £7.9 million, partially offset by related fees.

Operator

Public offer related costs, which refers to takeover costs incurred by Spectris thus far, was £7.9 million in the first half. Software implementation costs were £13 million, down from £22 million last year. We have now reached steady state in Malvern Panalytical and for the first phase of Dynamics, so our ERP project costs have reduced substantially. We expect to see improved cost effectiveness from here. Our recent acquisitions have led to an increase in amortization to £24.7 million. As a result, statutory operating profit was £24.8 million, broadly the same as last year. Further down the table, I want to remind everyone of the £210 million gain that we had on the disposal of Red Lion last year. We also incurred £22.9 million of net interest costs in the period, which reflects the current net debt position of the group after the acquisition of MicroMaritima, SIAP, and PA Midcrest.

Operator

This next slide shows the main drivers of our sales and operating profit performance in the first half. That were reported in the first half of 2024 did not reoccur in the first half of 2025. We saw good operating leverage in the period, driven by strong contribution from price and pass-through of tariff to end customer. The increase in overheads is a net number with savings from our profit improvement program of approximately £10 million being offset by other items, including higher variable compensation year on year. Foreign exchange was a headwind in the period due to the strength of sterling against the dollar, the euro, and the Chinese renminbi. As you can see, our recent acquisitions have had the biggest impact on our P&L performance in the first half.

Operator

While slightly softer than we anticipated, we expect an improved profit contribution in the second half of the year, which I'll come back to later. If we can now turn to cash and net debt. As said, I was very pleased with our first half cash performance, with our net debt unchanged despite the payment of the final dividend. Our focus on working capital helped to deliver a £15 million inflow in the first half, driven by the receivables and payables. Our focus is now on further improvement in inventories, with detailed group reduction plans fully underway. We tend to build inventory in the second quarter ahead of our stronger second half, hence we expect larger working capital gains in the second half of the year. Capital expenditure, restructuring, ERP costs, and interest costs were all in line with expectations and our full-year guidance.

Operator

We received a £1.9 million tax credit in the period as a result of rebates in the UK and Germany in particular. This was fully expected, and we have left our full-year cash tax guidance unchanged. The largest outflow was the 2024 final dividend that was paid out in June, whilst a foreign exchange translation inflow of £26.2 million reflects sterling strength against the U.S. dollar and to a lesser extent the euro. Taking these movements all together, we finished the period with net debt of £546 million. As said, again, largely unchanged compared to the financial year past. Coming on now to our divisional performance, starting with Spectris Scientific. Orders in the first half were 2% higher on a like-for-like basis, with 14% growth in the second quarter. On a reported basis, orders grew by 17% in the first half and 32% in the second quarter.

Operator

The book-to-bill ratio was 1.04. As the chart in the bottom right shows, like-for-like order growth has been positive in three of our last four quarters, and this building momentum is encouraging as we look ahead to the second half of this year and on to 2026. Sales in Spectris Scientific were 3% higher on a like-for-like basis, again driven by a strong second quarter, where like-for-like sales grew by 19%. This was due in part to an easier comparator. On a reported basis, sales were 21% higher in the first half, with 38% growth in the second quarter. Adjusted operating margin increased by 70 bps to 11.1%, driven by operating leverage and cost savings. Turning now to Spectris Dynamics, order intake in the first half was 7% lower on a like-for-like basis, driven by continued weakness in automotive.

Operator

This was compounded by a tough comparator as we booked a number of large simulator orders in virtual tests last year. On a reported basis, orders were 3% lower in the first half. Book-to-bill was slightly below one. You can see the impact of the automotive downturn in the order chart in the bottom right. Encouragingly, after a prolonged downturn, we continue to see good momentum in machine manufacturing, with aerospace and defense remaining robust. Sales in Spectris Dynamics were 3% lower on a like-for-like basis, again impacted by automotive weakness. On a reported basis, sales were flat to the first half. Adjusted operating margin was resilient, increasing by 10 bps to 12.4% despite lower sales volumes due to a very strong execution on cost savings. This next slide shows the three key profit drivers in the second half that give us confidence in meeting our full-year expectations.

Operator

Firstly, our profit improvement program. In our April trading update, we communicated that we saw potential upside to our original cost savings target of £30 million for 2025. We can now confidently say that we expect to realize savings of over £30 million this year. With over £10 million of savings in the first half, we will also expect to deliver at least £20 million of savings in the second half. The program was always expected to be second half weighted and potentially even more so given the updated cost saving target. Another driver of profit growth in the second half will be the contribution from the three acquisitions we made last year. Their profit contribution in the first half was slightly lower than we had expected, largely due to timing and delays due to export control as a result of tariff regimes.

Operator

These orders will be delivered in the second half. In addition, the order intake in the three acquisitions has been strong in the first half, particularly SIAP, which has seen order growth of over 30%. Their combined order backlog gives us confidence in their second half profit contribution, which we now expect to total approximately £20 million. This is a greater second half weighting than we originally anticipated. Finally, as Andrew highlighted earlier, we are building momentum in the business, particularly in Spectris Scientific. Our Q2 performance, even allowing for the easier comparator, was encouraging. Whilst we are mindful that macroeconomic uncertainty stemming from tariffs remains elevated, the underlying organic improvement that we are seeing gives an element of confidence for the second half. To be clear, we are not relying on a strong recovery in the second half to meet our expectations.

Operator

Our profit improvement program and the contribution from the acquisitions will be the most significant drivers of profit growth in the second half. With that, I'd like to hand back to Andrew.

Speaker 1

Thank you, Angela. Over the past seven years, we have repositioned Spectris as a leader in precision measurement and have made great strides in advancing our purpose-led strategy, enabling our customers to make the world cleaner, healthier, and more productive. We have simplified and refocused the group through eight divestments at attractive valuations, redeploying the cash into 16 complementary acquisitions. We've also delivered strong capital returns to shareholders with over £1 billion returned through dividends and share buybacks alone. Through careful portfolio management, disciplined execution strategy, and exceptional people, Spectris has become a more focused, higher quality, and higher performing company. Our commitment to innovation, sustainability, and customer-centric solutions compounded by our acquisitions has positioned us as a leader in our market. We have built a business geared for long-term growth in exciting, structurally growing end markets.

Speaker 1

The company's commitment to operational excellence and sustainability is not only improving margins, it is also enhancing our brand and position with customers, as well as creating a positive and lasting impact on the planet and society. During the global pandemic, we took the decision to establish the Spectris Foundation to support and empower the next generation of innovators, particularly in underrepresented groups. To date, we've improved access to a high-quality STEM education for over 50,000 students, and I'm pleased to say the foundation's impact continues to grow year on year. I am very proud of the transformation of the group since 2018. From the beginning, we have sought to create an environment where great talents can thrive in a healthy, high-performance culture, aligned behind a clear strategy, and encouraged to aim high in our delivery.

Speaker 1

Thanks to the continued hard work of all my colleagues, Spectris today is a high-quality business, well-positioned for sustained success. In summary, it is pleasing to see the clear momentum coming through in our first half results. We have delivered a robust first half performance in a tough economic environment. Encouragingly, momentum improves through the period with a very strong second quarter, particularly in Spectris Scientific. We delivered strong cash conversion in the first half, underlining the group's highly cash-oriented nature and our focus on deleveraging. Looking ahead to the rest of 2025, we now expect over £30 million of savings from our profit improvement program for the full year, with most of that still to come in the second half. We anticipate a strong second half performance from last year's acquisitions, with high levels of synergies in our business case.

Speaker 1

We do see signs of recovery in many of our end markets, and while tariff-related uncertainty still remains, our second quarter performance was encouraging. Positive operating leverage will always help support our second half profit performance. With continued focus on working capital improvement, we expect to deliver another strong cash performance in the second half, providing confidence in bringing leverage back down within our one to two times target range by year-end. Finally, turning to our guidance, we continue to expect adjusted operating profit to be in line with management expectations. With that, thank you for listening. Andrew and I would be very happy to take your questions, whilst recognizing that we are still in an offer period. As such, when it comes to prospective takeovers of Spectris, we can only comment on what is already in the public domain.

Speaker 4

We will now begin the question and answer session. If you would like to ask a question, please press star, followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star, followed by two. Again, to ask a question, press star one. If you're streaming today's call, please dial in and enter star one. As a reminder, if you're using a speakerphone, please remember to pick up your headset before asking questions. We will pause here briefly as questions are registered. The first question is from the line of Mark Fleiner from Spectris Scientific. You may proceed.

Speaker 1

Thank you very much. In the circumstances, Andrew, I think probably we can just ask you about some of the end market trends you're seeing, particularly the life science pharmaceuticals, which is obviously very important for you. The commentary is still relatively muted, but the Q2 was very big. I know that's partly the comps, but are you seeing any willingness to invest back into instrumentation, or is this other parts of that broader segment that is picking up? Likewise, academia was, I guess, surprisingly strong given what's going on in the U.S. Could you comment on that too?

Speaker 2

Of course, Mark. Thanks for your question. Yes, it's great to see pharma getting back into growth in the first half of this year after what's been a really prolonged, depressed market. We've seen pharma improve across Europe and Asia in particular, with North America remaining relatively flat. We are seeing an increased demand for instruments starting to come through, which is really pleasing. I think if you compare that to some of our peers, there's been similar commentary in the latest quarterly reporting for the American peers. On the academia side, we had a very strong quarter on academia after a bit of a weaker Q1. If you remember, we also saw a big order uplift in Q4. It's proven to be somewhat lumpy.

Speaker 2

I think that's really driven by some of the uncertainty that's been caused by government support in various countries around the world and customers having to navigate that and deciding when they're going to place their orders. We saw academia up strongly in Europe in the first half. In Asia, it was pretty flattish, down in China. Even in North America, we were up a couple of digits in academia. Despite some of the withdrawal of support in North America, we are still seeing demand coming through. I think a lot of that is from the fact that a lot of the academic research institutes in the U.S. have really, over the last decade or so, recognized that they can't rely so much on U.S. government support. That has been slowly diminishing over the years. It's been a bit of a disruption more recently.

Speaker 2

I think a lot of this is happening funded through sources other than the U.S. government.

Speaker 1

Great. Thank you. If I can just check on one of the weaker markets, obviously automotive is very tricky, but are you still seeing decent demand for the virtual testing side of things? There's been some suggestion people are focusing more on that as a lower-cost way of doing R&D.

Speaker 2

Yeah. It's a bit of a mixed picture. If I give you sort of a flavor, we saw North America down in auto last year. There's quite a correction in North America with the move away from the EV platforms maybe in the U.S. Our sales and orders into North America are actually flat year over year. We start to see that we are seeing a slightly improving trend. That's really as a consequence if the OEMs decided to cancel or change any of their platform programs, it then takes them over a year. We start to see that we are seeing a slightly improving trend. That's really as a consequence if the OEMs decided to cancel or change any of their platform programs, it then takes them.

Speaker 2

That's really as a consequence if the OEMs decided to cancel or change any of their platform programs, it then takes some time for the new innovations, new platforms to start to come through for us to then benefit from the orders associated with those. North America, against the easier comp, was flat out the first half. We did see China down. I think we had a lot of that more of the electric battery investment that was made through to the end of 2023. We've been less repeat orders on that side of things in China. The big downturn is in Europe, particularly in Germany, where we are seeing quite a disruption amongst our OEM customers. As a consequence of that, that's not only leading to overall lower demands for products and services, but it's also impacting some of the, particularly the larger CapEx projects associated with virtual testing.

Speaker 2

Some of our large simulators are €34 million in terms of the cost to customers. We are seeing some of those projects being delayed and customers just taking longer to take decisions. The positive side is with those that we are still seeing a good pipeline of prospective orders. It's just taking us longer to convert those orders as customers are managing their CapEx budgets and keeping an eye on what's happening in the wider market.

Speaker 1

Excellent. Thank you very much.

Speaker 4

Thank you, ladies and gentlemen. If you would like to ask a question, please press star followed by one on your telephone keypad. There are no further questions at the moment. You may proceed.

Speaker 2

All right. Thank you. I appreciate that.

Speaker 4

I'm sorry, but.

Speaker 2

Carry on.

Speaker 4

We do have another question in queue. We have a question from the line of Bruno Gianni with UBS. You may proceed.

Speaker 4

Thank you for taking my questions. The first one is just on the medium to long-term outlook for the group. I appreciate there's uncertainty in the market today, but if we take a step back, how do you think about the three to five-year outlook for Spectris? Have the drivers changed all that much or compared to the CMP three years ago? Has something changed in terms of how you structurally view the market in light of recent policy uncertainty? Or perhaps are you just as confident or perhaps even more confident given recent acquisitions in terms of the group's growth and margin potential in the medium term? Just some thoughts there would be interesting.

Speaker 2

Yeah, Bruno, nice to meet with you again. Thanks for your question. I think you know the strategy that we laid out in October of 2022 as our large capital market day absolutely remains in place. If you know it's a reflection since then, we've been through quite an almost unprecedented period of not just sort of prolonged weakness in end markets, but also we've really seen we saw weakness really across all our end markets at the same time, which is very unusual for us. I was saying that given what I said in the presentation earlier, and just looking at our sort of growth rates over the last 12 months, you can see that we've been in accelerating growth since the middle of last year and then crossing the positive growth in Q4.

Speaker 2

That's the same story whether you look at it on a reported basis or on a like-for-like basis. The graphs look very similar. I'm very confident in the strategy that we laid out that we are in attractive long-term sustainable growth markets. I'm still very bullish about the future for the group, based on the fact that we have been executing a consistent strategy. We've been investing in very much sort of customer-backed innovation. We've elevated our R&D levels. We had a record year for product launches in 2024. That continues through to 2025. Our vitality index is improving, investing in very much sort of customer-backed innovation. We've elevated our R&D levels. We had a record year for product launches in 2024. That continues through to 2025. Our vitality index is improving. Innovation is really key for driving future demand for the group.

Speaker 2

I remain both confident in our end markets that they are very good structural drivers. Given our strategy has been very much targeted over structural drivers in our end markets where we have leading positions with our technology and where we're innovating to create new positions, and we have a pretty strong moat around those, the prospects for the group remain very positive.

Speaker 2

That's very clear. I'm just interested in the Q2 book-to-bill. It appears that orders grew well year over year and quarter over quarter. However, book-to-bill was modestly below one. I suspect that this was perhaps due to some customers pulling forward orders in light of tariff uncertainty, which explains the strong Q2 sales performance. I guess I'm just wondering if you did see any pull forward in Q2 from Q3 or later quarters, and could you perhaps just discuss customer behavior and attitude in recent months and how they're navigating tariffs?

Speaker 2

Yeah. I think on the tariff situation, we continue to broadly pass on, you know, pass through the tariff-related costs. I think customers are accepting of that, and our peers are doing things, you know, acting in a very similar manner. It has clearly caused some sort of disruption just to recognize the revenue against some of those orders. We had some of that at the end of Q1, where customers were effectively waiting to see what was going to happen with the tariffs. Over the last few months, you know, as tariffs have swung in various jurisdictions or against various countries, we have had customers asking us to delay shipping product, which has sort of created some lumpiness. We're still seeing some of that.

Speaker 2

Certainly for some of the acquisitions, Micromeritics Instrument Corporation has had some of that in Q2, where, you know, we were customers asked us not to ship orders because of the tariffs. Those orders will get delivered in the second half now. It's being disruptive, but I think the world, certainly as we're seeing it, you know, is sort of, wouldn't say taking it in its stride necessarily, but is accepting of it. It's good to see that we are seeing the order momentum coming through in Q2. As I said earlier, kind of the fact that we've been through this sort of quite unprecedented, prolonged, and broad weakness in end markets, we are seeing quite sort of, I would say, tens of demands from our customer base where our sales and order pipeline look really very positive. We have, of course, opportunities to go after.

Speaker 2

It's just the time it takes to convert those orders continues to take longer than it has if you look at it on a historic basis. I think there's certainly reasons for optimism there.

Speaker 2

Understood. That's very clear. Could we just touch on the underlying profitability of the group in the first half and particularly Scientific? Because last year, you had a comparative that included and asked the impact from the ERP system, so circa around £15 million. If we adjust for that, there's an underlying deterioration of around, I guess, 200 basis points on the group level and around 300 basis points in Scientific despite some modest organic sales growth and a strong contribution from cost savings. Could you perhaps maybe just elaborate a little bit in terms of whether there was something unusual that might have impacted underlying margin in H1? If it's just seasonality around acquisitions or contributions from acquisitions, that would be helpful.

Speaker 2

Thanks for the question. There's nothing, there's no unusual impact in H1 that has affected the margin quality at all. Probably just more the volume that Andrew's just alluded to. We've had some delays in revenue as we exited Q2. I think looking forward, however, trying to get confidence around the profit margin in H2, there's a number of building blocks that I think we've touched on, which is, you know, it's storing the profit margin in H2. There's a number of building blocks that I think we've touched on, which is, you know, don't forget, we've not just got the acquisitions themselves. We've also got sales synergies from the acquisitions that are on top within the Scientific business, and those are progressing at pace. We've already got identified sales synergies of between $10 million and $15 million.

Speaker 2

We're actually exceeding the business plan, and most of them are actually second half weighted. We touched on the profit through the program itself has always been second half weighted, and that is a full impact on profit margins. The margin quality lifts up substantially. Lastly, we've just got the general trend of the business where it's historically also always been 65% to 70% in the second half. We did have softness in some of our acquisitions in H1, and we expected revenue to be slightly higher. As Andrew said, some of that is export control topics related to tariffs. Those orders are sitting in the backlog, and we're expecting those to execute in the second half as well, contributing to the volume and ultimately the drop through on our operational reading. We're very confident in the path to the operating margin quality. I'll get answered the question.

Speaker 2

I just follow on, sorry, Angela. In terms of you mentioned in the presentation, circa £20 million of incremental profit from those acquisitions in the second half. I guess that might imply a margin north of 30%, but I'm not sure what we've penciled in in terms of incremental sales. Could you perhaps either speak to the margin on those or on that incremental profit contribution, or the absolute contribution from acquired sales, or the incremental contribution from acquired sales in the second half?

Speaker 2

I mean, it's a bit of a mixed bag, in all honesty. We've got a business like SIAP who have got very, very high margins. There's a lot of software in the business. They've got double-digit margin drop through, but Micromeritics slightly less. We haven't given color on the breakdown of those acquisitions. We always talk about them as a group. I'd prefer not to go into the detail of it today. I think the only thing I'd use to take away is that we are exceeding the business plan and the margins and sales are performing as we expect.

Speaker 2

Thank you very much. Both greatly appreciate the insights, as always. Thank you.

Speaker 1

All right. Thank you, Bruno.

Speaker 4

There are no additional questions waiting at this time. I would like to pass the conference back to the management team.

Speaker 1

All right. Thank you, everyone, for joining. I appreciate we've given our circle of staff the rest of the liberty questions today. I understand that. Thank you for joining. Just by way of closing, I just want to emphasize some of the points I made earlier. Since 2018, we've transformed the group into a portfolio of really high-quality businesses with attractive growth and margin profiles that really positions the group to sustain success. Our expectations for this year are very much supported by our order momentum and an improving sales outlook, along with the expected benefits from the recent acquisitions and efficiency programs that we've talked about. In the long term, our confidence in the group's continued success stems from our strategic investments, but also the strong execution track record that the group has demonstrated, underpinned by exceptional people and a really healthy, high-performance culture.

Speaker 1

Spectris is now extremely well placed to harness the power of precision measurement in solving its customers' toughest challenges. Thank you very much for joining. I'm sure we'll speak soon.

Speaker 4

Thank you.

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