- Instrument and control engineer Spectris (LSE: SXS) has suffered a few years of tough market conditions, with North American trading subject to that unwelcome epithet challenging.
Though statutory 2016 results looked bad, the year was impacted by one-offs including a 115m impairment relating toOmega Engineering and ESG Solutions. That alone reduced the firms EPS figure bya massive 96.8p to just 8.6p but adjusted EPS came in at 127.5p, for a rise of 12%.
It looks like 2017 shouldbe something of a transformational year for the companys fortunes, with EPS expectedto gain 7% this year followed by a further 12% next perhaps not the kind of massive rises that would have growth investors salivating, but a welcome reversal of the recent trend.
Maystrading updateboasted a 22% rise in sales for the period. And while like-for-like sales declined by 1% in the troublesome North American market, we saw an 11% rise in the Asia Pacific region and 4% in Europe. But the comment that I really liked was: The group continues to be highly cash generative and maintains a strong financial position.
Overall, what Im seeing here is a company thats been through a bit of a down cycle, but which is enjoying an improving outlook while still in rude health. Net debt of 150.9m at the end of 2016 was only around 70% of EBITDA, which seems fine for a firm at a relative low point in its earnings, and strong cash flow should boost that position in the medium term.
The dividend is modest at around 2%, but its well covered and has kept on growingsignificantlyahead of inflation, with rises of better than 5% forecast for this year and next.
Doing something right
Online travel agent On The Beach (LSE: OTB) is an intriguing prospect. Floated in September 2015, the shares were doing well until they were hammered by the UKs vote to leave the EU in June last year, an event that is increasingly threatening an economic slowdown and a serious tightening of our discretionary spending belts.
But since a post-referendum low, weve seen the share price climbby 128% to todays 403p, more than double the IPO price. On The Beach appears to be doing something right.
Part of that something is clear from interim results released in early May, which showed a 28% growth in adjusted pre-tax profit, with adjusted earnings per share up 27%. Net debt was reduced to an impressive 2.3m from 6.6m a year previously and that was after the 12m acquisition ofSunshine.co.uk.
Disrupting the market
How does it do it? The company focuses on one specific market,and speaksof its journey to disrupt the online retail of beach holidays with its scalable, flexible, innovative technology. The firms business model is also, apparently, asset-light and cash-generative, two things I generally like to see in any company.
I confess Im not too keen on the companys moniker, even if it is a goodfit for its target market, because I see generic-sounding names as providing a barrier to building a strong brand image. Im also a little concerned about a possible lack of barriers to entry, and I wonder how easy it would be for others to follow the same strategy (especially an asset-light one).
But I do like what Ive seen of On The Beachsoperations so far.